Financial
SaaS Quick Ratio & Net New MRR / ARR waterfall formula (growth vs churn)
Measure subscription growth efficiency via (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR) alongside Net New ARR.
SaaS Quick Ratio (MRR Leaky Bucket test) vs Accounting Acid-Test Ratio
Do not confuse the SaaS Quick Ratio with balance-sheet liquidity! Coined in venture SaaS benchmarking, the SaaS Quick Ratio measures how many dollars of gross recurring revenue you ADD for every $1 lost to churn and downgrades: SaaSQuickRatio = (NewMRR + ExpansionMRR) / (ChurnedMRR + ContractionMRR).
With 45,000 new MRR, 15,000 expansion MRR, 10,000 churned MRR and 5,000 contraction MRR, the ratio is 4.00. Net new MRR is 45,000; multiplying by 12 gives an annualized recurring-revenue movement of 540,000. This is not revenue already earned or a guaranteed forecast.
Use consistent currency, measurement period and revenue definitions, with churn and contraction entered as positive magnitudes. A ratio above one means additions exceed losses; it is not a universal quality benchmark and says nothing directly about cash generation or profitability.
| MRR Waterfall Metric | Formula | Illustrative result |
|---|---|---|
| Gross Added MRR (New + Expansion) | =A2 + B2 | $60,000 ($45k + $15k) |
| Gross Lost MRR (Churn + Contraction) | =C2 + D2 | $15,000 ($10k + $5k) |
| SaaS Quick Ratio | =ROUND((A2+B2)/(C2+D2), 2) | 4.00x (additions are four times losses) |
| Net New ARR (12 × Net New MRR) | =((A2 + B2) - (C2 + D2)) * 12 | +$540,000 ARR |
Zero-churn-safe SaaS Quick Ratio and Net New ARR waterfall formulas
The ratio is undefined when there is no gross loss, including when both additions and losses are zero. Reject negative or missing inputs rather than silently converting signs with ABS.
=IF(OR(COUNT(A2:D2)<>4,MIN(A2:D2)<0),"Invalid MRR inputs",IF(C2+D2=0,"No gross MRR loss",ROUND((A2+B2)/(C2+D2),2)))Annualized net recurring-revenue movement
Multiplies net monthly recurring movement (Gross Additions minus Gross Losses) by 12.
=((A2 + B2) - (C2 + D2)) * 12Try the example
Use the original values or change them to test your understanding.