SaaS Quick Ratio

The SaaS Quick Ratio (introduced by Mamoon Hamid of Kleiner Perkins) measures the efficiency of MRR growth by comparing the revenue being added to the revenue being lost. A high quick ratio means you are growing MRR faster than you are losing it. It is a single metric that captures both the growth engine and the leaky bucket problem simultaneously.

formula.sh

SaaS Quick Ratio = (New MRR + Expansion MRR) ÷ (Churned MRR + Contraction MRR)

> New MRR: revenue from customers who started paying for the first time this month
> Expansion MRR: incremental MRR from existing customers (upgrades, seat additions)
> Churned MRR: MRR lost from customers who canceled this month
> Contraction MRR: MRR lost from customers who downgraded but did not cancel
> A ratio above 4 is considered excellent; above 1 means you are growing

example

example.sh

New MRR: $20,000. Expansion MRR: $5,000. Churned MRR: $4,000. Contraction MRR: $1,000.

($20,000 + $5,000) ÷ ($4,000 + $1,000) = $25,000 ÷ $5,000

→ SaaS Quick Ratio of 5.0 — excellent growth quality

why it matters

The quick ratio reveals the quality of growth in a way that top-line MRR growth cannot. Two companies can both grow MRR at 15% per month — but one might achieve this with a quick ratio of 8 (efficient, low churn, high expansion) while the other has a quick ratio of 1.2 (grinding to overcome massive churn). The former is building a durable business; the latter is on a treadmill.

For investors evaluating Series A and B companies, a SaaS quick ratio below 2 is a signal that the churn problem needs to be solved before scaling acquisition. Above 4 is a green light for aggressive growth investment.

common mistakes

✗Ignoring quick ratio when MRR is growing — absolute growth disguises efficiency problems that compound over time

✗Not separating contraction from churn in the denominator — lumping them together understates the churn problem in the numerator

✗Chasing a high quick ratio by artificially suppressing churn recognition rather than fixing the underlying retention problem

pro tips

✓Track quick ratio monthly on a rolling 3-month basis to see trend, not just point-in-time snapshot

✓If your quick ratio is declining, decompose it: is new MRR slowing, is churn increasing, or is expansion weakening?

✓Use quick ratio as a hiring gate: do not scale the sales team until quick ratio is consistently above 3

the mrrsucks take

A SaaS Quick Ratio below 1 means you are actively destroying recurring revenue faster than you are creating it. You are not running a growth machine — you are running a churn factory with a marketing budget.

faq

What is a good SaaS Quick Ratio?+

Below 1: shrinking (dangerous). 1–2: slow growth with significant churn problem. 2–4: acceptable. Above 4: excellent, typically means expansion is strong and churn is controlled.

How is the SaaS Quick Ratio different from the current ratio in traditional finance?+

The traditional current ratio compares current assets to current liabilities. The SaaS Quick Ratio is an entirely different concept — it measures MRR growth efficiency, not liquidity. The naming similarity is coincidental.

The $0 MRR milestone›Zero revenue roasts›

related metrics

./install-the-daemon

$9. 365 roasts. one public endpoint of pure shame.