Calculate your SaaS quick ratio from new, expansion, churned, and contraction MRR to see whether recurring revenue growth is outpacing churn.
SaaS Quick Ratio Formula
SQR = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
- SQR is the SaaS quick ratio, a unitless multiple
- New MRR ($) is monthly recurring revenue added from brand-new customers during the period
- Expansion MRR ($) is revenue added by existing customers through upgrades, added seats, or add-ons
- Churned MRR ($) is revenue lost from customers who canceled
- Contraction MRR ($) is revenue lost from customers who downgraded
The default mode of the calculator applies this formula directly: enter the four MRR components for one period and it returns the quick ratio, your net new MRR, how many dollars you gained for every dollar lost, and the share of your gross gains you actually kept. The second mode works backward. Pick a target quick ratio, enter your expected churned, contraction, and expansion MRR, and it solves for the new MRR your sales team needs to add:
Minimum New MRR = max(0, Target SQR * (Churned MRR + Contraction MRR) - Expansion MRR)
Every input must be an MRR movement from the same period and currency, normally one month or one quarter. Mixing periods distorts the ratio; the size and direction of the error depend on the movements. Enter churn and contraction as positive loss amounts. Blank expansion and contraction count as zero.
Benchmarks and the Share of Gains You Keep
With positive gross MRR gains, the net-gain share is (gains - losses) / gains, or 1 - 1/SQR when SQR is positive. A ratio of 4 corresponds to 75% and a ratio of 1 to 0%. This is not a customer retention rate; it can be negative and is undefined when gains are zero. Positive gains with no losses give no finite quick ratio, and no gains with no losses give an undefined ratio.
| Quick Ratio | Rating | Share of gains kept | What it means |
|---|---|---|---|
| Above 0 and below 1.0 | Shrinking | Negative | MRR is declining even with new sales coming in |
| 1.0 | Break even | 0% | Every dollar gained is offset by a dollar lost |
| 2.0 | Leaky growth | 50% | Growing, but half of all new revenue is refilling churn |
| 4.0 | Benchmark | 75% | A frequently cited reference, not a universal standard |
| 5.0 or more | High ratio | 80% or more | Gains are at least five times losses; cost and retention require separate measures |
Stage matters when you read the number. Young companies have a tiny churn base, so high ratios are expected; mature companies carry a large MRR base where even modest churn percentages are large dollar amounts.
| Company stage | Universal quick-ratio threshold | How to read it |
|---|---|---|
| Early stage (under $1M ARR) | No universal threshold | A small loss denominator can make the ratio unusually high or volatile |
| Growth stage ($1M to $10M ARR) | No universal threshold | Compare consistent periods alongside growth, retention and acquisition costs |
| Scale stage (over $10M ARR) | No universal threshold | The churn base is large, so pair the ratio with net revenue retention |
Example Problems
Example 1: solving for the quick ratio. A SaaS company adds $400,000 in new MRR and $200,000 in expansion MRR in a quarter. It loses $100,000 to churn and $50,000 to contraction. Inflows total $600,000 and outflows total $150,000, so SQR = 600,000 / 150,000 = 4.0. Net new MRR is $450,000 and the company keeps 75% of its gross gains, at the frequently cited 4 reference.
Example 2: solving for required new MRR. You expect $30,000 of churned MRR and $10,000 of contraction MRR next month, plus $25,000 of expansion MRR, and you want a quick ratio of 4. Total inflow required is 4 * $40,000 = $160,000. Subtracting the $25,000 of expansion leaves $135,000 of new MRR that sales must add to hit the target.
Frequently Asked Questions
Is the SaaS quick ratio the same as the accounting quick ratio?
No. The accounting quick ratio, also called the acid-test ratio, measures short-term liquidity by comparing liquid assets to current liabilities. The SaaS quick ratio measures growth efficiency by comparing recurring revenue gained to recurring revenue lost. They share a name and nothing else, so make sure you reference the right one in board materials.
What is a good SaaS quick ratio?
A frequently cited reference is 4, meaning $4 of MRR gained for every $1 lost. Above 1, these gains exceed losses; at 1 they balance; below 1 losses exceed gains. Company stage, revenue scale, margins, retention and acquisition costs matter, so 4 is not a universal health or investment threshold.
Can a high quick ratio be misleading?
Yes, in two common ways. On a small revenue base the ratio swings wildly, so one canceled contract can move it by whole points and one good month can flatter it. It also says nothing about scale: $8,000 gained against $2,000 lost and $800,000 gained against $200,000 lost both score 4.0. Read the ratio next to net new MRR, and compare consistent monthly and quarterly periods. For a combined period, divide total gains by total losses rather than taking an unweighted average of monthly ratios.
