How the MRR health grade is calculated
The grade combines three SaaS metrics weighted by predictive power for net revenue growth: Quick Ratio (50%), Net Revenue Retention (35%), and gross MRR churn (15%). Each metric maps to a 0–100 sub-score, weighted, then bucketed A–F.
Quick Ratio
Quick Ratio = (New MRR + Expansion MRR) / (Contraction MRR + Churned MRR). Coined by Mamoon Hamid at Social Capital. A SaaS Quick Ratio above 4.0 is healthy growth; below 1.0 means you're shrinking on a net-revenue basis even if logo count is flat.
Net Revenue Retention (NRR)
NRR = (Starting MRR + Expansion − Contraction − Churn) / Starting MRR × 100. Best-in-class public SaaS companies (Snowflake, Datadog, Cloudflare) reported NRR above 120% in 2024. For bootstrapped SMB SaaS, anything above 100% means you're growing inside the existing customer base.
Gross MRR churn rate
Gross churn = Churned MRR / Starting MRR × 100. Bessemer State of the Cloud reports SMB SaaS gross churn averages 3–7% per month; mid-market under 1.5%; enterprise under 0.5%. This metric ignores expansion — it's the raw bleed rate.
Grade thresholds
- A — Quick Ratio > 4.0, NRR > 110%, gross churn < 2%
- B — Quick Ratio 2.0–4.0, NRR 100–110%, gross churn < 4%
- C — Quick Ratio 1.2–2.0, NRR 95–100%, gross churn 4–7%
- D — Quick Ratio 0.8–1.2, NRR 90–95%, gross churn 7–10%
- F — Quick Ratio < 0.8, NRR < 90%, gross churn > 10%
When this metric breaks
The MRR health grade is volatile under $10K MRR — a single $500 churn can swing the grade two letters. We weight grades softer below $10K MRR. For sub-$5K MRR, focus on absolute new MRR rather than ratios.