Measure your subscription growth efficiency against revenue churn
Monthly Revenue Gains
Monthly Revenue Losses
SaaS Quick Ratio
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What is the SaaS Quick Ratio?
The SaaS Quick Ratio measures the efficiency of a SaaS company's growth. It compares the revenue being added (New + Expansion) against the revenue being lost (Churn + Contraction). A high ratio indicates that your growth is substantial enough to easily overcome your losses. If the ratio is low, it means you are in a "leaky bucket" situation where you have to work extremely hard just to stay in the same place.
- The Benchmark: A ratio of 4.0 is considered excellent for a growing SaaS. This means for every $1 you lose, you are gaining $4.
- Efficiency: A ratio below 2.0 suggests that your churn is too high, and your growth is inefficient. You should focus on retention before spending more on sales.
- Expansion Power: High Expansion MRR (getting current customers to pay more) is the secret weapon to a sky-high Quick Ratio.
What is MRR? +
MRR stands for Monthly Recurring Revenue. It is the predictable total revenue generated by your business from all active subscriptions in a single month.
How is this different from the standard Quick Ratio? +
The standard accounting Quick Ratio measures balance sheet liquidity (Cash vs. Debt). The SaaS Quick Ratio measures revenue momentum (Growth vs. Churn). They are completely different metrics.
What is "Expansion MRR"? +
Expansion MRR is additional revenue from existing customers, usually through seat add-ons, plan upgrades, or cross-selling additional features.
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