As a business owner, your natural instinct is to grow your business, reach a bigger target audience, and increase your sales. Doing this requires an in-depth examination of the current state of your business and where you wish to be within a given period, otherwise called a GAP analysis. This analysis is an excellent tool that can give you the framework within which to expand your business.
If you are planning to grow your operations, this article highlights everything you need to know about using a GAP analysis template to plan your expansion.
What Is a GAP Analysis?
A GAP analysis is a business assessment tool that examines the current state of your business in relation to where you would like to be within a given period. It highlights the difference between these two positions, allowing you to allocate resources effectively. Generally, a GAP analysis answers the following questions:
- What is your business’s current position?
- Where do you wish it was?
- What is the difference?
- How can you close this gap?
After conducting GAP analysis, you can identify the gaps in your operation that stand between where you are and your future projections. You can then direct resources, time, and human resources towards these areas to improve your business’s product quality, efficiency, and profitability.
What Is a GAP Analysis Template?
A GAP Analysis Template is a printable document with fillable areas where you can fill in the current state of your business and your organization. It helps you calculate the difference between these two positions by creating visual data of your operations and sales. If you don’t want to create a GAP analysis from scratch, you can use a template.
GAP Analysis Templates
How to Conduct a Gap Analysis (Step-by-Step)
Step 1: Determine Your Current State
The first step in conducting a Gap analysis is determining your business’s current state. You can represent this ‘value’ as a growth rate, sales number, or revenue made, among other measurements. For example, if you own a clothing store that sells 5,000 apparel in a financial period, your current state is ‘5,000.’ A large retailer with a 10 percent growth rate every two years will record its current state as 10 percent. As you can see, one business can have several current states, so it is up to you to pick the one that works best for your analysis.
Step 2: Describe Your Desired State
Next, you need to determine where you want to be, called the desired future state, stretch goal, or target state. This value should be realistic and relevant to your current state. From the examples given in step one, the clothing business might set a desired future state of 7,000 apparels per financial period and the retailer a growth rate of 15 percent every two years. It is advisable to use a chart in this step for a clear representation of these values.
Step 3: Determine the Gaps
By now, it is clear that there is a gap between where your business is and where you want it to be. This is the difference between your current state and your desired future state. You must now calculate the gap and give it a specific value so you can start bridging it. To do this, you must ensure both the current and desired future states are within the same time period. From our examples:
- Clothing store: Current state (5,000 apparel), Desired future state (7,000 apparel), period (one financial period).
- Retailer: Current state (10 percent growth rate), Desired future state (15 percent growth rate), period (2 years).
You must project where your business will be at your current growth rate and compare it to where you will be with your new growth rate. This is the gap.
Step 4: Find the Reason for the Gap
The first step to closing the gap is determining why it exists in the first place. If your company is currently making $40,000 less than it could make, you must get to the root of the problem by answering the following questions:
- Do your customers enjoy your products or services?
- Are you offering any new products or services?
- What pain points does your target audience have?
- Is your marketing strategy effective?
Step 5: Define How You Will Close the Gap
Depending on the answers you get in step 4, you can now work out a way to close the gap between your current and desired states. Keep the following in mind when formulating a plan:
- Use all the information gathered during the first four steps to creating a feasible strategy for improvement.
- Determine the individual and total costs of implementing your strategy. Be very specific and realistic, so your plan is actually attainable.
The Benefits of a Gap Analysis
Essentially, a GAP analysis brings your business’s current and desired future states into focus, helping you identify the gap between the two so you can formulate a plan to bridge it. Doing this forces you to answer specific questions about your business, which, when answered, becomes a strategic improvement approach. It also reduces the chances of having incompatible strategies within one development plan.
The GAP analysis also allows you to track the performance of your business through the years. Every time you perform it, you capture real-time qualitative and quantitative data about your business. You then use it as a baseline for the subsequent analysis, creating a historical timeline.
Tips for Conducting a Gap Analysis
Many businesses dismiss the GAP analysis as a difficult to conduct analysis, denying themselves of the many benefits it offers. If you have such concerns, the following pointers should help you implement this crucial tool:
- Report all your strengths and successes honestly without exaggeration or elimination.
- Don’t be afraid to highlight your weak areas, as doing so will help you improve them.
- Set realistic goals in line with your constraints and assign them an attainable period.
- Be very specific. Avoid vague statements or goals that you cannot measure.
The GAP analysis is a game-changing strategy that can help your business achieve better sales, market reach, and productivity. Using a GAP Analysis Template, you can map out where you are as an enterprise and where you wish to be within a given period. You can calculate the difference between these two points and create a plan that directs resources towards closing that gap. Remember to be honest, precise, and realistic when creating a GAP analysis.