SaaS Quick Ratio (Mamoon Hamid) — growth durability in 30 seconds
SaaS Quick Ratio (Mamoon Hamid) — growth durability in 30 seconds
In 2014 Mamoon Hamid (Kleiner Perkins, formerly Social Capital) proposed one of the most elegant SaaS metrics:
> Quick Ratio = (New MRR + Expansion MRR) / (Churned MRR + Contraction MRR)
How many dollars of new MRR you generate for every dollar lost. It's the pulse of growth durability.
Why this formula
MRR Growth Rate shows what is growing. Quick Ratio shows on what basis. If you have 10% MoM growth but a Quick Ratio of 1.2, it means: for every $1 of new MRR you lose almost as much. You're running on a treadmill with no forward motion.
Compare:
- Company A: 10% MoM growth, Quick Ratio = 4 → durable growth
- Company B: 10% MoM growth, Quick Ratio = 1.5 → fragile growth, any shock = decline
Benchmarks
| Quick Ratio | Rating | ||
|---|---|---|---|
| <1 | Declining — you lose more than you gain | ||
| 1-2 | Weak growth, easily derailed | ||
| 2-4 | Good | ||
| >4 | Excellent — top decile SaaS |
Worked example
A SaaS startup over one month:
- New MRR: $80k (10 new customers × $8k ARR / 12)
- Expansion MRR: $20k (upgrades from existing)
- Churned MRR: $15k (2 customers left)
- Contraction MRR: $5k (downgrades)
Quick Ratio = (80 + 20) / (15 + 5) = 100 / 20 = 5.0 → excellent
What Sequoia / Kleiner Perkins say
In top-VC internal screening docs, Quick Ratio is often the first filter after growth rate:
1. MoM growth >7%? → if not, they pass
2. Quick Ratio >2? → if not, they pass
3. Burn Multiple <2? → if not, they pass
All three must be green. Any single red = they skip it.
3 levers to improve Quick Ratio
1. Reduce churn (the denominator)
- Onboarding: the first week drives 80% of future churn
- Customer Success: proactive outreach to high-ARR accounts
- Annual prepay contracts (mathematically cut monthly churn ×12)
- Health scoring + escalation for at-risk accounts
2. Raise expansion (the numerator)
- Seat-based pricing → growth with the customer's team
- Usage-based pricing → growth with usage
- Tiered features → natural upgrade path
- Account-based marketing for top-200 accounts
3. Reduce contraction
- Make tier downgrades a little painful (but not so painful they leave entirely)
- A pause-instead-of-cancel option for seasonal customers
- Win-back campaigns for recently churned
When Quick Ratio is MISLEADING
- Small base (<50 customers) — one big churn distorts everything
- Annual contract recalculations — switching annual→monthly billing makes the numbers jump
- Heavy seasonal businesses — Q4 SaaS vs Q1 e-commerce
- Mass free→paid conversions — New MRR can look inflated
Always look at a trailing 3-month rolling average, not a single month.
Relationship to other metrics
| Metric | Relationship to Quick Ratio | ||
|---|---|---|---|
| NRR | Quick Ratio ↑ → NRR ↑ (but NRR is net, Quick Ratio is gross) | ||
| Burn Multiple | High Quick Ratio = efficient growth, usually low Burn Multiple | ||
| LTV:CAC | Independent, but both show unit economics | ||
| Rule of 40 | Quick Ratio is a leading indicator of R40 improvement |
Bottom line
Quick Ratio is one number that shows your growth durability in 30 seconds. If it's <2 — fix churn first, then everything else. If >4 — scale, the economics are healthy.
Calculate your Quick Ratio below — the built-in calculator shows the result, the benchmark and recommendations.
---
Further resources
- /en/nrr — Net Revenue Retention, a complementary metric
- /en/burnMultiple — Burn Multiple, capital efficiency
- /en/blog/burn-multiple-saas-2026 — Burn Multiple in detail
- Mamoon Hamid on Forbes (2014) — first mention of Quick Ratio