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SaaS Metrics Library
SaaS Quick Ratio: Calculation, Benchmarks & Improvement Guide
The SaaS quick ratio compares the recurring revenue you add in a period with the recurring revenue you lose. It shows whether growth is coming from new and expanding customers faster than churn and downgrades take it away.
SAAS QUICK RATIO
No published benchmark with a stated sample. The most quoted rule of thumb:
Mamoon Hamid, SaaStr talk · a rule of thumb, not a survey
This article will provide
- Calculation
- Benchmarks
- Improvement
The SaaS quick ratio measures how efficiently a subscription business grows its recurring revenue. It divides the monthly recurring revenue (MRR) gained in a period by the MRR lost in the same period.
The gains are new MRR from new customers and expansion MRR from existing customers who upgrade or buy more. The losses are churned MRR from customers who leave and contraction MRR from customers who downgrade.
A ratio above 1 means the business added more recurring revenue than it lost. The higher the ratio, the less of each month's new business is spent replacing revenue that walked out of the door.
The metric is credited to Mamoon Hamid, then at Social Capital, who presented it at SaaStr Annual. Tomasz Tunguz described him in November 2015 as "the creator of the Quick Ratio".
Also known as: quick ratio for SaaS, MRR quick ratio, growth efficiency ratio.
How is SaaS quick ratio calculated?
The SaaS quick ratio is new MRR plus expansion MRR, divided by churned MRR plus contraction MRR, all measured over the same period.
SaaS quick ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
The inputs:
- New MRR: recurring revenue from customers who started paying in the period.
- Expansion MRR: the increase in recurring revenue from existing customers, through upgrades, extra seats or add-ons.
- Churned MRR: recurring revenue lost from customers who canceled in the period.
- Contraction MRR: the decrease in recurring revenue from existing customers who downgraded but stayed.
Worked example. In March a company adds $20,000 of new MRR and $10,000 of expansion MRR. It loses $5,000 to churn and $5,000 to downgrades.
SaaS quick ratio = ($20,000 + $10,000) / ($5,000 + $5,000) = $30,000 / $10,000 = 3.0
For every dollar of recurring revenue lost in March, the business added three. Net new MRR was $20,000.
Try it with your numbers
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Net new MRR: $20,000
3.00SaaS quick ratio
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Download the 2026 SaaS Benchmark Report We’ve emailed you a copy as well.How is SaaS quick ratio used by SaaS companies?
The quick ratio answers a question that MRR growth on its own cannot: how much of this month's sales effort went into standing still?
Two companies can report the same net new MRR with very different businesses underneath. One adds $25,000 and loses $5,000. The other adds $60,000 and loses $40,000. Both grew by $20,000, but the second needs three times the new business to get there, and any slowdown in sales turns straight into shrinking revenue. Their quick ratios, 5.0 and 1.5, show the difference immediately.
Finance teams use it in four ways:
- Board and investor reporting. It summarizes growth quality in one number next to MRR growth rate.
- Early warning on retention. A falling ratio while new MRR holds steady points to rising churn or downgrades before it shows up in annual retention figures.
- Planning targets. Rearranging the formula shows how much new and expansion MRR is needed to hit a growth plan at the current loss rate.
- Segment comparison. Calculated by plan, region or customer size, it shows which parts of the base grow efficiently.
It works best as a monthly or quarterly trend. A single month can swing sharply on one large cancellation or one large new contract.
What is a good result?
Higher is better. Below 1, the business lost more recurring revenue than it added in the period.
The most widely quoted threshold is 4. Mamoon Hamid, who introduced the metric, described "a quick ratio of four" as "quite desirable, four or above" in a SaaStr talk, meaning roughly four dollars added for every dollar lost. He said that "a bunch of data suggests" this but did not publish the data, so treat 4 as a rule of thumb.
Tomasz Tunguz showed in 2015 what 4 implies: "a SaaS startup growing at 15% can sustain a monthly customer contraction & churn rate of 5.0% per month, or 46% annually." He called that churn level "unsustainably high" and warned that "high growth rates can mask high dollar churn rates".
That warning is the main caution when judging your own result. The ratio rewards growth, so a fast-growing young company can post a high ratio while losing customers at a rate that will hurt once growth slows. As the recurring revenue base gets larger, the same percentage churn produces larger dollar losses, and the ratio tends to fall even when the business is healthy. Judge the ratio together with revenue churn and retention, not on its own.
What are the SaaS quick ratio benchmarks?
No published benchmark: no survey with a stated sample size and data year reports a SaaS quick ratio median. The reference points that are quoted are rules of thumb:
| Reference point | Quick ratio | Source |
|---|---|---|
| "Quite desirable, four or above" | 4 or more | Mamoon Hamid, SaaStr talk transcript, August 16, 2017 |
| Growth of 15% a month can carry 5.0% monthly churn and contraction | 4 | Tomasz Tunguz, November 3, 2015 |
Hamid said that "a bunch of data suggests" four is desirable, but the data behind it was not published, so read 4 as a guideline. Quick ratio medians that appear on secondary blogs, for example 3.4 or 1.4, are each attributed to a KeyBanc survey without a link to the primary report, and they contradict each other, so neither is used here.
Sources: Tomasz Tunguz, "What is the optimal quick ratio for your SaaS startup? Is it 4?", November 3, 2015; SaaStr, Mamoon Hamid talk transcript, August 16, 2017. Both checked October 26, 2026.
Measure growth quality
See what you add against what you lose.
ScaleXP calculates MRR and 30+ other SaaS metrics from your accounting invoices, your CRM data or both, on one definition every period.
Metric definitions can be edited to match the way your board and investors read MRR.
Automate Your SaaS MetricsSaaS quick ratio worked example
- Accounting: Xero, QuickBooks, Zoho Books
- CRM (with Xero or QuickBooks Online): HubSpot, Salesforce, Pipedrive
MRR added in March
$30,000
$20,000 of new MRR plus $10,000 of expansion MRR.
Illustrative example figures, not your live data.
What to do with your SaaS quick ratio number
The ratio has two halves, and the fix depends on which one moved.
- If the denominator rose, look at losses first. Split churned and contraction MRR by reason, plan and customer cohort. A ratio that falls because downgrades doubled is a pricing or product question, not a sales one. Customer-level detail is in customer churn and revenue churn.
- If the numerator fell, separate new from expansion. Expansion MRR usually costs far less to win than new MRR. A business with a weak expansion line is paying full acquisition cost for most of its growth.
- Track it beside net new MRR. A rising ratio with falling net new MRR means the business is shrinking its losses faster than its gains, which is better than the reverse but is still slowing growth.
- Use the same MRR definition every period. Decide once how annual contracts, discounts and one-off fees are treated in MRR, and keep it. Changing the definition moves the ratio without anything changing in the business.
Tracking the quick ratio inputs with ScaleXP
ScaleXP calculates MRR and 30+ other SaaS metrics from your accounting invoices, your CRM data or both. Set-up fees and other one-off items are excluded from MRR by account, and credit notes are netted off, so a one-time charge does not inflate the MRR added in a period.
Metric definitions can be edited, and metrics can be segmented by Xero tracking codes, QuickBooks Classes, HubSpot properties or Stripe metadata, so the gains and losses behind the ratio can be read by product line, region or customer group.
Frequently asked questions
What is the difference between the SaaS quick ratio and net revenue retention?
The quick ratio compares all recurring revenue gained, including new customers, with recurring revenue lost in the same period. Net revenue retention looks only at an existing group of customers and measures how their revenue changed over a year, with new customers excluded. The quick ratio therefore mixes acquisition and retention in one number, while retention isolates the existing base. Most finance teams report both, because a high quick ratio can come from strong new sales covering weak retention.
Is the SaaS quick ratio the same as the accounting quick ratio?
No. The accounting quick ratio, also called the acid-test ratio, is a liquidity measure: liquid current assets divided by current liabilities. The SaaS quick ratio has nothing to do with the balance sheet. It compares recurring revenue added with recurring revenue lost in a period. The shared name causes confusion in board packs, so it is worth labeling the SaaS version clearly as an MRR-based growth measure.
Should the SaaS quick ratio be calculated monthly or annually?
Monthly is the most common, because the inputs are monthly MRR movements and a monthly figure shows changes quickly. Monthly results can be volatile, especially for companies with a small number of large customers, where one cancellation can halve the ratio. Many finance teams therefore report a trailing three-month figure, summing each input over three months before dividing. Whatever period you choose, apply it consistently so that the trend is comparable.
Can the SaaS quick ratio be too high?
A very high ratio is good news, but it can hide two things. It may reflect a business so young that it has few customers able to churn yet, in which case the ratio will fall as the base matures. It can also be produced by a single large new contract in a month with unusually low losses. Check the dollar values behind the ratio and the trend over several periods before treating one high result as a sign of efficient growth.
Does ScaleXP calculate the MRR used in the SaaS quick ratio?
Yes. ScaleXP calculates MRR and 30+ other SaaS metrics from Xero or QuickBooks Online data, from HubSpot, Salesforce or Pipedrive data, or from both. For Zoho Books, ScaleXP provides MRR and ARR reporting. Customers choose the data source for each metric, and metric definitions can be edited, so the MRR behind each input is measured on one agreed definition every period. Set-up fees and other one-off items are excluded from MRR by account, and credit notes are netted off.
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Related metricsexpansion MRRcontraction MRRrevenue churnMRR growth rate
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