- Formula
- (New MRR + Expansion MRR) / (Churned + Contraction MRR)
- Unit
- ratio
- Models
- SaaS, Usage-based
| high-growth target | 4×+ | Mamoon Hamid / Social Capital (J. Hsu) |
| churn signal | <2× | Mamoon Hamid / Social Capital (J. Hsu) |
What it is
The growth quick ratio measures the efficiency of MRR growth by comparing new revenue added to revenue lost. The formula is (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR). A ratio above 1 means the business is growing net of losses.
How to calculate it
Sum new MRR from newly acquired customers and expansion MRR from upsells or seat additions in a given month. Divide that total by the sum of churned MRR (fully lost customers) plus contraction MRR (downgrades). The result shows how many dollars of new and expanded revenue are being generated per dollar lost.
Why it matters
The quick ratio captures both growth momentum and retention quality in a single number. A company with high new MRR but equally high churn looks fine on top-line growth but scores poorly on quick ratio, signaling a leaky bucket. It is especially useful for SaaS and usage-based models where expansion and churn are significant and recurring.
Benchmarks & pitfalls
Mamoon Hamid of Social Capital (popularized by J. Hsu) established the directional thresholds: above 4 is preferred for high-growth companies, while below 2 signals that churn is too high relative to growth. These are heuristics from a practitioner framework, not a rigorous empirical study, and no asOf date was specified for this source. The main pitfall is inconsistent MRR categorization — some teams count reactivations as new MRR, others as expansion, which can inflate the ratio. Also note that quick ratio does not distinguish between low churn and very high new MRR, so it should always be read alongside gross churn and NRR.