What is the Quick Ratio in SaaS and why does it matter?

Full Explanation

The Quick Ratio combines two critical growth metrics. NRR (net revenue retention) shows whether you're growing from existing customers. Growth rate measures headline ARR growth. Magic number measures CAC payback efficiency (quarterly new ACV / previous quarter CAC spend). A Quick Ratio above 0.75 is generally considered healthy — it means revenue growth is expanding from an existing customer base, not just from expensive new acquisition. A ratio below 0.3 suggests the company is burning through capital on customer acquisition without achieving efficient growth. For fundraising, investors examine Quick Ratio alongside burn rate: a company with -30% NRR (heavy churn) and 50% growth rate has a Quick Ratio near zero — that growth is unsustainable because it requires constantly replacing departing customers. Conversely, a company with 125% NRR and modest 20% growth has a strong Quick Ratio because existing customers are driving expansion.

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