Product metrics and goals
SaaS quick ratio
Also called Quick ratio
How efficiently a subscription business grows: recurring revenue gained for every unit of recurring revenue lost. Four or more is strong.
How it's worked out
(New MRR + expansion MRR) ÷ (contraction MRR + churned MRR)
Two companies can add the same net revenue in a month, one by winning a little and losing nothing, the other by winning a lot and losing nearly as much. The quick ratio tells them apart.
Below 1, the business is shrinking. Around 4 means growth comfortably outruns losses.
In practice
$12,000 of new and expansion MRR against $1,500 lost gives a quick ratio of 8.
Common mistake
Celebrating a high ratio in the early months, when there are few customers to lose and the ratio is naturally inflated.
Where it comes from
Popularised by investor Mamoon Hamid in 2015 as a measure of growth efficiency.