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For software as a service (SaaS) companies, the quick ratio measures growth efficiency by comparing how much your monthly recurring revenue (MRR) increases and decreases. It takes expansion, churn , and downgrades into account.
To calculate your SaaS quick ratio, add your monthly recurring revenue (MRR) from new customers plus the increase in your MRR from expansion. Then, divide the result by the sum of your monthly churn and lost MRR from downgrades.
A higher quick ratio indicates your ability to quickly and steadily increase your recurring revenue, even if you’re losing customers. A quick ratio of four (meaning, your MRR increases by $4 for every $1 you lose) is a benchmark for growth-focused early-stage startups.
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