SaaS Quick Ratio is the growth-efficiency metric for subscription businesses, calculated as (New ARR + Expansion ARR) ÷ (Churned ARR + Contraction ARR). It measures whether the business is adding more recurring revenue than it's losing. A ratio above 1 means net positive growth; 4+ is considered healthy, signaling that for every $1 of ARR lost, the company is adding $4 of ARR.
The math:
SaaS Quick Ratio = (New ARR + Expansion ARR) ÷ (Churned ARR + Contraction ARR)
Example (one quarter):
| Component | ARR change |
|---|---|
| New customer ARR | +$2M |
| Expansion ARR (existing customers upgrading) | +$1M |
| Total ARR added | +$3M |
| Churned customer ARR | -$300K |
| Contraction ARR (existing customers downgrading) | -$200K |
| Total ARR lost | -$500K |
Q...