Growth Accounting Metric Decomposer
Decompose user growth into acquisition, retention, churn, and resurrection components. Calculate Quick Ratio and identify growth bottlenecks.
Formula
Quick Ratio = (New Users + Resurrected Users) / Churned Users
Quick Ratio measures growth efficiency. >2 is excellent, 1-2 is healthy, <1 means shrinking. Decomposes growth into new, resurrected, retained, and churned segments.
Worked Examples
Example 1: Healthy SaaS Growth
Problem:Period: 30 days. Start: 10,000 users. End: 12,000. New: 3,000. Resurrected: 500. Churned: 1,500.
Solution:Net growth: 12,000 - 10,000 = 2,000 (+20%) Components: New: +3,000 Resurrected: +500 Churned: -1,500 Net: +2,000 ✓ Quick Ratio: (3,000 + 500) / 1,500 = 2.33 Churn rate: 1,500 / 10,000 = 15% Retention: 85% monthly (Good for B2C SaaS) Growth drivers: - New users: 60% of gross growth - Resurrection: 10% - Retention: preventing 30% loss Health: Excellent (Quick Ratio >2)
Result:20% growth | Quick Ratio: 2.33 (Healthy) | Retention: 85%
Example 2: Leaky Bucket Problem
Problem:Period: 30 days. Start: 5,000. End: 5,200. New: 2,000. Resurrected: 200. Churned: 2,000.
Solution:Net growth: 200 (+4%) Components: New: +2,000 Resurrected: +200 Churned: -2,000 Net: +200 Quick Ratio: 2,200 / 2,000 = 1.1 Churn: 40% (TERRIBLE!) Retention: 60% monthly Problem: Adding 2K users but losing 2K - Acquisition working - Retention broken - Quick Ratio barely >1 Action: STOP growth spend until retention fixed. For every $1 on acquisition, spend $3 on retention.
Result:4% growth (Unhealthy) | Quick Ratio: 1.1 | Fix retention URGENTLY
Example 3: Declining Product
Problem:Period: 30 days. Start: 20,000. End: 18,500. New: 1,000. Resurrected: 100. Churned: 2,600.
Solution:Net growth: -1,500 (-7.5%) Components: New: +1,000 Resurrected: +100 Churned: -2,600 Net: -1,500 Quick Ratio: 1,100 / 2,600 = 0.42 (CRISIS) Churn: 13% monthly = 81% annualized! Death spiral: - Losing 2.6K users - Only acquiring 1.1K - Shrinking 7.5%/month At this rate: 6 months to 50% user loss Immediate actions: 1. Interview churned users 2. Freeze features, fix core 3. Emergency retention program
Result:-7.5% growth | Quick Ratio: 0.42 (CRISIS) | Product in decline
Frequently Asked Questions
What is growth accounting?
Growth accounting decomposes user growth into components: new users added, existing users retained, churned users lost, and resurrected users who return. It reveals whether growth is acquisition-driven or retention-driven.
What is Quick Ratio?
Quick Ratio = (New + Resurrected) / Churned. Measures growth efficiency. >1 = net growth, <1 = shrinking. Ratios of 2-4 indicate healthy SaaS growth. Below 1 is a crisis requiring immediate retention focus.
What is a good retention rate?
Varies by product: Social apps need 40%+ monthly retention. SaaS: 90%+ monthly (B2B), 60-80% (B2C). E-commerce: 20-40% (repeat purchase). Track cohort retention over time for true picture.
What causes user churn?
Common causes: poor onboarding (never got value), unmet expectations, better alternatives, price, lack of engagement, technical issues, or no longer need product. First 30 days are critical.
What are resurrected users?
Previously churned users who return. Indicates: seasonality, product improvements attracting former users, or effective win-back campaigns. Resurrection rate of 5-10% is typical with active re-engagement.
Should I prioritize growth or retention?
Retention first for most products. Leaky bucket problem: adding users without fixing retention wastes acquisition spend. Retention improvements compound over time. Exception: very early stage validating product-market fit.
How do I calculate monthly churn?
Monthly Churn Rate = (Users Churned in Month / Users at Start of Month) × 100. Annual churn doesn't simply multiply by 12 - use (1 - retention rate)^12. 5% monthly = 46% annual churn.
What is negative churn?
When expansion revenue from existing customers exceeds revenue lost to churn. SaaS goal: net dollar retention >100% through upsells. Negative churn enables profitable growth without new customer acquisition.
How does cohort analysis help?
Cohort analysis groups users by signup date and tracks retention over time. Reveals: if retention is improving for new cohorts, product-market fit validation, and impact of product changes on retention.
What metrics should I track with growth accounting?
Essential: MAU/DAU, activation rate, retention curves, churn rate, quick ratio, and LTV:CAC. Track by cohort and segment. Weekly review for fast-growing products, monthly for most others.