SaaS Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR) Churned MRR = MRR of customers who have not renewed contracts Contraction MRR = MRR of customers who have decreased their payments

Developed by Mamoon Hamid

Can also be stated as: Quick Ratio = (Monthly Growth Rate + Churn Rate) / Churn Rate according to Tomasz Tunguz

**Measures growth efficiency - the ability to grow MRR in spite of churn

• QR>4** - Low revenue loss, high revenue expansion - efficient growth, highly attractive for VC
• QR 2-4 - Inefficient growth due to churn, which eats the revenue gains
• QR<2 - Unsustainable growth, revenue is not driving the business forward and any gain barely outweighs churn - churn is too high or new sales are not working - either product or customer success efforts require some tuning

4 is a good benchmark for young, high-growth companies but it changes as the company scales. Not very useful for companies in the 1st year of business - data not a reliable indicator of anything

If you target a QR=4, the company growing at 15% can sustain a monthly customer contraction & churn of 5% per month (or 46% annually)

Source: Tomasz Tunguz

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