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.
Companion tools
The grade summarizes recurring-revenue durability; turn each underlying signal into a decision with the Cohort Visualizer (cohort-real LTV, not the flat-churn shortcut), the CAC Payback Calculator (whether acquisition repays inside this MRR base), the Runway Calculator (cash window the grade sits on top of), and the Fundability Scorecard (where the grade lands on an investor radar).
Related reading
Where to lead with MRR vs ARR depending on stage and audience: MRR vs ARR for bootstrapped founders. Runway sub-text behind the grade: The SaaS Runway Playbook.