The data in this post about the SaaS Quick Ratio comes from our ongoing benchmarking analysis of hundreds of B2B SaaS companies. We will be releasing more benchmarks and key findings over the next few months.
Venture capitalist Mamoon Hamid created the SaaS Quick Ratio as a simple way to evaluate the growth efficiency of early-stage SaaS startups. He picked the Quick Ratio because it takes the traditional yardstick for SaaS startup success (MRR growth) and tempers it with the one metric that hamstrings so many otherwise-promising startups (Churn Rate).
As VCs like Hamid begin using the SaaS Quick Ratio to decide who to invest in, it becomes increasingly important for startups themselves to know where they stand with respect to the metric. Unfortunately, there isn’t a lot of reliable data out there about the Quick Ratio and how SaaS companies can use it to benchmark their own performance.
The SaaS Quick Ratio
“What Quick Ratio should I be aiming for?”
Without reliable data about the Quick Ratio, most SaaS executives are left wondering: “What’s the right Quick Ratio for my company? How can I tell whether my company’s Quick Ratio stacks up against the rest of my industry?”
In short, what Quick Ratio should SaaS executives be aiming for?
Based on his own experience investing in early-stage SaaS companies, Hamid came up with a rule of thumb that high-growth companies should shoot for a Quick Ratio of 4 (meaning that for every dollar they lose in a month they add 4).
Because Hamid has seen the numbers behind a lot of successful SaaS startups, this yardstick is incredibly valuable for founders and executives of SaaS companies.
To learn how to calculate the Quick Ratio for your company, check out this post.
But is Mamoon’s hypothesis in line with the data? How does the Quick Ratio actually look at growing SaaS startups?
We wanted to find out, so as part of our 2016 Sales Benchmarking Report, we took a close look at the Quick Ratios of the high-growth SaaS companies in our study. We sliced the data in every conceivable way to see what we could uncover about the optimal Quick Ratio for growing SaaS companies, and how the SaaS Quick Ratio evolves as companies grow.