Description
SaaS quick ratio is a metric used by SaaS companies to assess their ability to further their recurring revenues despite outflows or churn. This ratio compares the company’s revenue inflows with its revenue outflows to reflect net revenue growth, thereby highlighting the company's growth efficiency.
Example
SaaS quick ratio can be calculated as (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
Why it matters
This metric is used to understand a company’s growth efficiency since it considers both sides of revenue, additions from new and existing customers, and reductions due to churned and existing customers. A low ratio is an indication that a company is having trouble sustaining revenue growth. A high ratio means high and consistent growth in the company’s revenue.