SaaS quick ratio: formula, calculator and benchmarks
What is the SaaS quick ratio?
The SaaS quick ratio compares the recurring revenue a company adds with the revenue it loses: (new MRR + expansion MRR) ÷ (churned MRR + contraction MRR). Adding $15,000 while losing $6,000 in a month gives 2.5. Mamoon Hamid, who coined it, set 4 as the target.
Key facts
- Mamoon Hamid of Social+Capital introduced it at SaaStr Annual in 2015 as "Added MRR/Lost MRR", with the target "Maintain a Quick Ratio > 4". (Hamid, 2015)
- Tomasz Tunguz showed that a ratio of 4 at 15% monthly growth still allows churn and contraction of 5% a month, or 46% a year. (Tunguz, 2015)
- Benchmarkit's 2025 medians of 20% growth and 84% gross revenue retention imply a quick ratio of about 2.3, down from 4.0 in 2022 (our arithmetic). (Benchmarkit, 2026)
- Social Capital's Jonathan Hsu: "If you have a quick ratio of <2 then your churn is probably too high and you have something to fix." (Hsu, 2015b)
- It isn't the accounting quick ratio. Hsu warned it "should not be confused with the normal finance quick ratio". (Hsu, 2015a)
SaaS quick ratio calculator
Enter one month's recurring revenue movements from your MRR bridge. The quick ratio divides what you added (new and expansion) by what you lost (churn and contraction). Use the same month for every figure.
Want the quick ratio from real numbers? CX Cash is being built to track new, expansion, contraction and churned MRR from your billing data each month.
Get started free (opens in a new tab) See MRR growth tracking in CX Cash
How to calculate the SaaS quick ratio
SaaS quick ratio = (New MRR + Expansion MRR) ÷ (Churned MRR + Contraction MRR)
In words: divide the recurring revenue you added in a month by the recurring revenue you lost in the same month.
- New MRR: Monthly recurring revenue from customers who started paying this month.
- Expansion MRR: Extra monthly revenue from existing customers who upgraded, added seats or bought more.
- Churned MRR: Monthly revenue lost from customers who cancelled.
- Contraction MRR: Monthly revenue lost from customers who downgraded but stayed.
Worked example
An illustrative company starting the month at $200,000 of MRR. It adds $10,000 from new customers and $5,000 from upgrades, and loses $4,000 to cancellations and $2,000 to downgrades. The results below are computed by the calculator's tested code.
| Input | Value |
|---|---|
| MRR at the start of the month | $200,000 |
| New MRR | $10,000 |
| Expansion MRR | $5,000 |
| Contraction MRR | $2,000 |
| Churned MRR | $4,000 |
SaaS quick ratio: 2.50 MRR at month end: 209,000Net new MRR: 9,000Month-on-month growth: 4.5%
Quick ratio = (10,000 + 5,000) ÷ (4,000 + 2,000)
A quick ratio of 2.50: $2.50 added for every $1 lost. Growth of 4.5% in the month looks healthy, but $6,000 leaks out each month, 3% of the starting base. Halve churn and contraction with the same new business and the ratio doubles to 5.0, with net new MRR of $12,000 instead of $9,000 (our arithmetic).
In a spreadsheet
- Quick ratio, with new MRR in B2, expansion in C2, churned in D2 and contraction in E2: =(B2+C2)/(D2+E2)
- Net new MRR from the same cells: =B2+C2-D2-E2
- Quick ratio implied by annual growth in B2 and gross revenue retention in C2: =1+B2/(1-C2)
How founders and investors read the quick ratio
If you're the founder
- It shows how much of your growth leaks away. Tunguz: "High growth rates can mask high dollar churn rates." Two companies with the same net new MRR can have very different ratios.
- ChartMogul's example: $10,000 added against $2,000 lost is a ratio of 5; $16,000 against $8,000 is 2. Both net $8,000, but the first needs far less new business to keep growing.
- Fix the denominator first. Baremetrics: "The fastest way to improve your SaaS quick ratio without increasing spend is to reduce churned MRR and grow expansion MRR from your existing subscriber base." (Baremetrics)
Questions you'll be asked
- What were new, expansion, contraction and churned MRR this month?
- How has the ratio moved over the last six months?
- Which customers churned, and why?
- Do you count reactivated customers as new revenue?
If you're the investor or LP
- It measures the quality of growth, not its cost. Ben Murray, The SaaS CFO: it "does not measure any sort of financial efficiency or payback on your bookings acquisition." Pair it with CAC payback or the burn multiple.
- Expect it to fall with scale. The same churn rate on a bigger base is more dollars to replace, so a ratio of 4 is much harder at $50M of ARR than at $2M.
- Ask for the MRR bridge behind it. The ratio is only as good as the line between new, expansion, contraction and churn.
Questions to ask the company
- Can we see the monthly MRR bridge for the last 12 months?
- What are gross and net revenue retention for the same period?
- How does the ratio differ by segment or plan?
- Are one-off or services fees excluded?
What is a good SaaS quick ratio?
4 or more is the long-standing target for an early-stage company, and under 2 signals a churn problem. No current dataset publishes quick-ratio medians, but Benchmarkit's growth and retention medians imply about 2.3 for a typical private SaaS company in 2025 (our arithmetic).
Show the numbers
| Calendar year | At median GRR | At 75th-percentile GRR |
|---|---|---|
| 2022 | 4.00x | 7.00x |
| 2023 | 3.45x | 6.40x |
| 2024 | 3.17x | 6.20x |
| 2025 | 2.25x | 3.22x |
Benchmarks
| Segment | Measure | Typical | Top quartile | As of | Sample | Source |
|---|---|---|---|---|---|---|
| Implied by Benchmarkit's 2025 medians (our arithmetic) · No survey we found publishes quick-ratio medians; these combine published growth and GRR figures. | ||||||
| B2B SaaS and AI-native | Implied quick ratio at median growth (20%) and median GRR (84%) | 2.25 | — | CY 2025 | 338 companies for growth, 226 for GRR (Benchmarkit) | Benchmarkit, 2026 |
| B2B SaaS and AI-native | Same growth with 75th-percentile GRR (91%) | 3.22 | — | CY 2025 | 338 companies for growth, 226 for GRR (Benchmarkit) | Benchmarkit, 2026 |
| Rules of thumb | ||||||
| Early-stage SaaS (Hamid) | Target | Above 4 | — | Feb 2015 | VC rule of thumb | Hamid, 2015 |
| Enterprise SaaS (Social Capital) | Invest above; fix below | Above 4 preferred; under 2 means churn is too high | — | Sep 2015 | VC rule of thumb | Hsu, 2015b |
| Subscription companies (ChartMogul) | Bands | Under 2 low; 2–4 average; 4 or more high | — | Mar 2016 | Analytics vendor's guide | ChartMogul, 2016 |
| Insight Partners portfolio (via Kellogg) | Top-quartile line | 4x or more | — | Jun 2023 stale | Investor's portfolio benchmarks | Kellogg, 2023 |
The rule of 4 was set for young, fast-growing companies. G-Squared's Gene Godick: "Early-stage companies with a small revenue base often post Quick Ratios well above 4 almost automatically, since there is little installed revenue yet to churn."
Retention moves the ratio most. With 20% growth, lifting gross revenue retention from 84% to 91% raises the implied ratio from 2.25 to 3.22 (our arithmetic).
Compiled Oct 2, 2026. Next review: June 2027, after Benchmarkit's 2027 report. Left out: Baremetrics Open Benchmarks (Its quick-ratio figures load only in a browser session, so we couldn't verify them); Insight Partners 2023 Sales KPI Report (We cite its top-quartile line through Dave Kellogg's review rather than the report itself). Download these benchmarks as CSV.
Quick ratio vs net new MRR, NRR, GRR and burn multiple
| Metric | Answers | Ignores | Use it when | It misleads when |
|---|---|---|---|---|
| SaaS quick ratio | Recurring revenue added per $1 lost | What the growth cost | Checking the quality of an early-stage company's growth | The revenue base is tiny or the company is mature |
| Net new MRR | How much MRR grew this month | How much was lost along the way | Tracking growth month by month | Strong sales hide heavy churn |
| Net revenue retention | What existing customers are worth a year later | New customers | Judging expansion and retention together | A few large upsells mask broad churn |
| Gross revenue retention | Share of revenue kept, before expansion | Growth of any kind | Isolating churn and downgrades | Read without growth |
| Burn multiple | Cash burned per $1 of net new ARR | The mix of revenue added and lost | Judging what growth costs | The company is profitable |
Quick ratio = 1 + net new MRR ÷ lost MRR. Equivalently, as Tunguz puts it, (growth rate + churn rate) ÷ churn rate, so at 15% monthly growth a ratio of 4 allows 5% monthly churn and contraction.
Common mistakes: how the quick ratio misleads
- Reading it on a tiny base. With little revenue to lose, ratios above 4 come almost automatically. ChartMogul: "For companies in the first year of business, SaaS Quick Ratio isn't so helpful."
- Expecting 4 at scale. At $50M of ARR with 90% gross revenue retention, a ratio of 4 needs 30% annual growth (our arithmetic). Track the trend instead of chasing 4.
- Treating it as an efficiency metric. It ignores what new revenue cost. A company can buy a high ratio with heavy sales spend; check CAC payback or the burn multiple too.
- Reading a single month. Annual contracts renew, and churn, in lumps. Use a trailing three months or a quarter for companies on annual billing.
- Counting one-off revenue. Setup and services fees aren't recurring. Including them inflates new MRR and the ratio.
- Confusing it with the accounting quick ratio. The accounting quick ratio, or acid test, measures liquidity. Kellogg calls the SaaS version "a bad name" for "a good concept".
Where the SaaS quick ratio came from and how it's regarded today
| When | What happened | Source |
|---|---|---|
| Jul 2026 | G-Squared Partners: "The Quick Ratio measures the quality of growth, not just the amount of it." | G-Squared, 2026 |
| Jun 2026 | Benchmarkit reports median growth down to 20% and median GRR down to 84% for 2025, implying a ratio near 2.3 (our arithmetic). | Benchmarkit, 2026 |
| Jun 2023 | Dave Kellogg, reviewing Insight Partners' benchmarks, notes "They say 4x+ is top quartile". | Kellogg, 2023 |
| Mar 2016 | ChartMogul: "The currently accepted Quick Ratio benchmark is 4". | ChartMogul, 2016 |
| Nov 2015 | Tomasz Tunguz shows a ratio of 4 can coexist with 46% annual churn and contraction. | Tunguz, 2015 |
| Oct 2015 | SaaStr publishes Hamid's talk: "maintain a quick ratio of greater than four, aspirational." | SaaStr, 2015 |
| Sep 2015 | Social Capital's Jonathan Hsu applies the ratio to users, then to revenue, preferring above 4 for enterprise SaaS. | Hsu, 2015b |
| Feb 2015 | Christoph Janz charts new against lost MRR within weeks, "inspired by Mamoon Hamid's great 'Quick ratio'". | Janz, 2015 |
| Feb 2015 | Mamoon Hamid presents "The SaaS Quick Ratio – Added MRR/Lost MRR" at SaaStr Annual. | Hamid, 2015 |
How it's regarded today
- Still the shorthand for growth quality. Analytics tools and CFO firms still teach it with the rule of 4; G-Squared's 2026 guide calls Hamid's benchmark "the most widely cited threshold".
- Directional, not definitive. Ben Murray, in a guide last updated in September 2026: "However, I would classify this metric as directional" (The SaaS CFO).
- Harder to hit as retention slips. Benchmarkit's median GRR fell from 88% to 84% in 2025. At typical growth rates that pulls the implied ratio well below 4 (our arithmetic).
- Software-as-a-Service (SaaS) Secrets to Raising Venture Capital (Hamid, 2015). The original deck defining the ratio and the target of 4, with examples from companies Social+Capital backed and passed on.
- What is the Optimal Quick Ratio for Your SaaS Startup? (Tunguz, 2015). The algebra linking the ratio to growth and churn, and how much churn a ratio of 4 can hide.
- 2026 SaaS and AI Metrics Benchmarks (Benchmarkit, 2026). Median growth and gross revenue retention since 2022, the inputs for the implied ratio.
What experts say about the quick ratio
“The Quick Ratio measures the quality of growth, not just the amount of it.”
“We’ve coined the term called the “quick ratio,” the SaaS Quick Ratio. It’s a derivative from accounting.”
“High growth rates can mask high dollar churn rates.”
“For enterprise SaaS companies, we prefer to invest in companies with a quick ratio greater than 4.”
SaaS quick ratio FAQ
What is the SaaS quick ratio?
A measure of growth quality: the recurring revenue a company adds (new and expansion) divided by the recurring revenue it loses (churn and contraction) over the same period.
How do you calculate the SaaS quick ratio?
Add new and expansion MRR, then divide by churned plus contraction MRR. $15,000 added against $6,000 lost is a quick ratio of 2.5.
What is a good SaaS quick ratio?
4 or more is the classic target for an early-stage company; under 2 suggests churn is too high. Mature companies typically run lower, near 2 to 3 on today's growth and retention.
Is the SaaS quick ratio the same as the accounting quick ratio?
No. The accounting quick ratio, or acid test, compares liquid assets with current liabilities. The SaaS version borrows only the name.
Why does the quick ratio fall as a company grows?
The same churn rate on a larger base means more revenue lost each month, while new business rarely grows as fast. The denominator catches up with the numerator.
Should I measure it monthly or annually?
Monthly is the convention, but a single month is noisy. Companies on annual contracts should use a trailing quarter or year.
What is the difference between the quick ratio and net revenue retention?
NRR looks only at existing customers: what they're worth a year later after expansion and churn. The quick ratio adds new customers and compares all gains with all losses.
Related metrics and guides
Sources
Every link was opened and checked. Archived copies guard against links that move or disappear.
Primary data
- 2026 SaaS and AI Metrics Benchmarks. Benchmarkit, 1 Jun 2026. Sponsored report; growth and GRR read from its charts. Archived copy
Practitioner
- Software-as-a-Service (SaaS) Secrets to Raising Venture Capital. Mamoon Hamid (Social+Capital) on SlideShare, 5 Feb 2015. SaaStr Annual 2015 deck, the copy Social Capital links to; the live page blocks automated readers, so we read the archived copy. Archived copy
- Mamoon Hamid of Social+Capital: Why Sh*t Really Gets Funded (Video + transcript). SaaStr (talk transcript), 8 Oct 2015. Transcript of a February 2015 talk. Archived copy
- Diligence at Social Capital Part 1: Accounting for User Growth. Jonathan Hsu (The Startup on Medium), 22 Sep 2015. The live page blocks automated readers; read from the archived copy. Archived copy
- Diligence at Social Capital Part 2: Accounting for Revenue Growth. Jonathan Hsu (The Startup on Medium), 28 Sep 2015. The live page blocks automated readers; read from the archived copy. Archived copy
- What is the Optimal Quick Ratio for Your SaaS Startup?. Tomasz Tunguz, 3 Nov 2015. Archived copy
- Why (most) SaaS startups should aim for negative MRR churn. Christoph Janz (The Angel VC), 22 Feb 2015.
- SaaS Quick Ratio: How efficient is your growth?. ChartMogul, 9 Mar 2016. Analytics vendor's guide. Archived copy
- Interpreting the Insight 2023 Sales KPI Report. Dave Kellogg (Kellblog), 18 Jun 2023. Archived copy
- How to Calculate and Understand the SaaS Quick Ratio. Ben Murray (The SaaS CFO), 7 Jun 2017 (updated 25 Sep 2026). Archived copy
- The SaaS Quick Ratio: Measuring Growth Efficiency Beyond Rule of 40. Gene Godick (G-Squared Partners), 27 Jul 2026. Blog of an outsourced CFO firm; no archived copy found.
- Calculate SaaS Quick Ratio and Measure Growth Efficiency. Baremetrics, Undated. Analytics vendor's guide. Archived copy
Changes to this page
- · Major · Page published. Benchmarks compiled 2 October 2026.
Cite this page
Dominique Bouillet, "SaaS quick ratio: formula, calculator and benchmarks", CX Cash, updated Oct 24, 2026, https://cxcash.com/metrics/saas-quick-ratio
CX Cash builds software for founders and investors. This page is education, not investment advice. Third-party figures link to their source, and our own arithmetic and illustrative examples are labelled as such.