Quick Ratio Calculator

The Quick Ratio measures revenue growth by comparing new and expansion MRR to churned and contracted MRR. A higher ratio indicates more efficient growth, while a lower ratio suggests potential growth challenges.

How to Use This Calculator

1. Enter your starting Monthly Recurring Revenue (MRR)
2. Input your expected monthly new MRR (revenue from new customers)
3. Set your monthly rates as percentages:
   • Churn Rate (% of MRR lost from cancellations)
   • Expansion Rate (% of MRR gained from existing customers)
   • Contraction Rate (% of MRR lost from downgrades)
4. Choose the number of months to forecast
5. The calculator will display:
   • A chart showing your MRR components over time
   • New and expansion MRR (green bars)
   • Contraction and churn MRR (red bars)
   • Quick Ratio trend line (blue)
   • Monthly breakdown of all metrics

This calculator assumes a constant monthly new MRR for simplicity. You may see declining Quick Ratios unless balanced by strong expansion rates because churn and contraction grow with your MRR base. SaaS companies work to increase new MRR over time.

Understanding Quick Ratio

The Quick Ratio is calculated by dividing your growth MRR (new and expansion) by your churned MRR (churn and contraction):

Quick Ratio = (New MRR + Expansion MRR) / (Churn MRR + Contraction MRR)

For example:

• If you add $10,000 in new MRR and $5,000 in expansion MRR
• While losing $3,000 to churn and $2,000 to contraction
• Your Quick Ratio would be: ($10,000 + $5,000) / ($3,000 + $2,000) = 3.0

Common Mistakes to Avoid

1. Ignoring Expansion Revenue: Don't forget to include revenue from upsells and expansions
2. Mixing Churn and Contraction: Keep customer cancellations (churn) separate from downgrades (contraction)
3. Using Annual Numbers: Quick Ratio should be calculated using monthly figures
4. Not Tracking Trends: A single month's ratio isn't as valuable as the trend over time

Note: This calculator assumes constant monthly rates and does not account for seasonality in order to keep the model simple. In reality, many SaaS businesses experience seasonal variations in new MRR, churn, and other metrics.

Related Metrics

• Net Revenue Retention (NRR): Measures revenue retention including expansion revenue from existing customers
• Gross Revenue Retention (GRR): Shows base revenue retention without expansion revenue
• MRR Growth Rate: Overall growth rate of monthly recurring revenue over time
• Customer Churn Rate: Rate at which customers cancel subscriptions

Tips for Improving Your Quick Ratio

1. Reduce Churn:

   • Improve onboarding process
   • Enhance customer support with proactive outreach
   • Implement early warning systems

2. Increase Expansion Revenue:

   • Develop strategic upsell opportunities
   • Create high-value add-on features
   • Implement value-based pricing models

3. Optimize New MRR:

   • Define and target ideal customer profiles
   • Improve sales efficiency metrics
   • Reduce time to value through product optimization

4. Minimize Contraction:

   • Build sticky features based on user behavior
   • Align pricing with customer value
   • Strengthen product-market fit