quick ratio, SaaS

SaaS Quick Ratio is a critical efficiency metric that measures a company's ability to grow recurring revenue in the face of churn, calculated by dividing the sum of revenue inflows (New MRR + Expansion MRR) by the sum of revenue outflows (Churned MRR + Contraction MRR). Unlike simple growth rates, this ratio exposes the "quality" of growth by revealing whether a startup is efficiently compounding value or merely filling a "leaky bucket" where high sales velocity masks unsustainable customer attrition. A widely accepted benchmark for a healthy SaaS business is a Quick Ratio of 4, implying that for every dollar of revenue lost to churn or down-sells, the company generates four dollars in new or expanded revenue, ensuring sustainable long-term expansion.