You’ve probably heard the phrase gap analysis before when discussing business growth strategies. It is one of the best means to assess where your business could stand to improve by comparing your current state to your desired future state.
The process entails scrupulous, detailed research, but the benefits can be substantial. The analysis report is extensive and can result in significant improvements in various business processes.
If you’re considering the analysis, below we’ll break down the process and its benefits.
What Is Gap Analysis?
Gap analysis is a formal study that compares your business’s current state to its expected or desired outcomes. The process shines light on where there is room for improvement. Identifying gaps helps you figure out where you’re falling short of expectations, and what steps you can take to close these gaps.
Gap analysis may be a reaction to a shortcoming, like not meeting sales goals for a specific quarter. However, it can also be entirely proactive. Some leaders may be looking for ways to improve your chances of success before undertaking a new strategy, for example.
What are the different types of gap analysis?
There’s no one-size-fits-all type of analysis. You can conduct the analysis in multiple different areas depending on what you’re hoping to achieve through the process.
There are four main types of gap analysis.
The most common type of gap analysis, is performance analysis looks at your company’s specific goals and identifies how far you need to go to achieve them. It also pinpoints what changes can close the gap.
Market gap analysis helps you identify new sales opportunities by identifying areas where demand is greater than supply. It helps your business find unfilled niches in the current market, helping you stay ahead of competitors.
Manpower gap analysis helps you make more informed decisions about staffing and budgeting. It looks at things like employee onboarding, off-boarding, and training to determine how to help your employees meet performance goals.
Profit gap analysis is often performed when your company overestimates profit projections. It helps determine what factors may have negatively impacted your profits, and how to proceed to ensure you meet revenue goals in the future.
How Is Gap Analysis Conducted?
While every company has a slightly different means of conducting gap analysis, most companies follow five basic steps.
Step One: Identify your gap analysis goals.
Before you even start, it’s important to understand what you want out of it. Do you want to know how effective an existing strategy or operation is? Do you want to know why you’re underperforming in a particular market? Are you wondering if you need to hire new staff? The more specific your goals going, the more informative the process will be.
Step Two: Look at your current state.
The first thing to do when conducting gap analysis is to understand where your business stands right now. You can look at everything from sales figures to internal process documentation to KPIs. For a thorough understanding of your current state, it’s best to look at both quantitative factors (like data and metrics) and qualitative ones (like customer satisfaction ratings and employee interviews).
Step Three: Figure out your end goal.
What is the ideal state for your business? For example, your ideal state may entail certain sales figures or profit margins. Looking at industry standards can also help you identify your end goal. What are your competitors doing that you’re not? Even more important, are there any niches your competitors are not filling? This can help you find untapped markets.
Step Four: Figure out the gap.
What factors are separating your current state from your ideal state? This is the analysis stage and the point at which you look at the data gathered to draw conclusions about your current operations. Comparing and contrasting your ideal state with your current one can illuminate many opportunities for improvement.
Step Five: Create an action plan.
Once you understand the reasons for the gap, you can create a roadmap to success. Go through the list of obstacles keeping you from your goals and determine concrete solutions for each one.
Why Is Gap Analysis Helpful?
Its is an invaluable tool to help your company grow. A data-driven action strategy can provide invaluable insight that will ultimately lead to growth.
Identify new opportunities.
Running a business entails a lot of time and energy, and leaders often slip into a “can’t see the forest for the trees” mindset. As a result, you may be missing some chances for growth.
It can help you look at what your company offers versus the needs of the market. There may be a specific niche you’re specially equipped to fill. Or, you may need to make a few tweaks to what you’re currently offering to meet customer needs.
Taking a long, hard look at your company’s operations can help you pinpoint weak spots. Do your employees need more training? Are there specific departments that are failing to perform?
What big or small changes can be made to help things run smoothly? Gap analysis answers these questions and gives you a concrete action plan to improve.
Increase Your Profits With Gap Analysis
If you’re not meeting revenue goals, gap analysis is an invaluable tool. It can help you identify not only what went wrong, but how to better allocate your resources in order to fix the issues.
It not only identifies factors that adversely affect your profits, it gives you specific steps to take to correct these issues.
The Bottom Line
When it comes to identifying growth opportunities, gap analysis is one of the best means to do so. It provides a data driven strategy for your company based on the standards of your specific industry.
Whether you want to correct a specific issue or simply be proactive about forming new strategies, gap analysis is a comprehensive, step-by-step process that leaves you with a detailed action plan. Meeting expectations is never easy, but the analysis helps you form a plan by taking it one step at a time.
Interested in gap analysis? You can schedule a free consultation with us at any time to talk about gap analysis and other services. Contact us for more information.