Quick Ratio (SaaS)

The SaaS quick ratio measures the quality of your recurring-revenue growth by comparing the revenue you gained to the revenue you lost. You divide new plus expansion revenue by churned plus contracted revenue. A ratio of 4 means you added four pounds of recurring revenue for every pound you lost, a sign of healthy, efficient growth.

What makes this useful to a founder is that it cuts through a misleadingly good top-line number. Two companies can both show 20% net growth, but one is adding new revenue cleanly while the other is gaining a fortune and leaking nearly as much, papering over heavy churn with aggressive acquisition. The quick ratio exposes that. A ratio above 4 is generally considered strong for an early-stage SaaS; a low ratio is a warning that you're filling a leaky bucket and need to fix retention before pouring in more acquisition spend.