Is your business operating at the level that you want it to?
You probably have a simple answer to the question posed above (either a “yes” or a “no”). But if we asked you how far your business is from where you want it to be, you would have to give a more extended answer. You might also need to think a bit more about your current state and desired destination before attempting a response.
If you would like to be more certain about your enterprise’s current state and where it’s headed, you can conduct a gap analysis to find out.
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What is Gap Analysis?
The gap analysis is a tool that’s used by businesses to ascertain how they can get from where they are (in terms of competencies or performance levels) to where they want to be. Other names for it are ‘needs assessment’ and ‘need-gap analysis’.
A gap analysis sets out:
- The current state of your business (in terms of specific criteria)
- Where you want your business to be
- What needs to be done to move from the current state to the ideal state
This analysis brings the company’s goals into focus and causes it to reflect on whether it is getting closer to those goals. And when the nature of the gap between the current and ideal states becomes clear, the analysis helps businesses define solutions that can deal with the underlying factors perpetuating the gap.
The aim here is not just to identify the gap. It’s to draw up an action plan for crossing it.
Where You Should Use This Tool
You can use this tool to spot need-gaps in sales, financial performance, quality control, employee productivity, etc.
For instance, you could want your sales revenue at ₦700,000 per month by the end of the year. Your gap analysis could chart a course of action for taking it to that destination, from your current sales revenue of ₦400,000 per month.
How to Conduct a GAP Analysis
Here are the steps involved in conducting a gap analysis.
1. Define Your Target
Your targets should be realistic and measurable. Prioritize quantitative descriptions.
Let’s say you run a bakery, and you’re producing 200 loaves of bread per day. You are aiming to bake 300 loaves per day in about six months from now. If this goal is set based on the resources you can muster within the time frame you have chosen (six months), then it’s probably achievable. It’s certainly better than simply saying “I would like to ramp up production at my bakery”.
With your goals set in quantitative terms, it’s easier for you to track progress.
2. Lay Out Your Present Situation
List the factors that define your business’s state (or the aspect of your business you would like to analyze).
The aim here is to be as specific with the description as possible. If you are looking at sales volumes, you will want to begin by collecting your sales data for a period you want to define as ‘the present’ (it could be data for a few months or a year). You may use the average of the period you have selected as the benchmark figure for your current performance.
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Remember, the gap analysis is about finding ways to improve your enterprise’s present state. So when you’re examining your data, you should also find out what has caused or sustained the situation they describe. Your question should be “what contributes to these indices?”
3. Identify and Analyze Gaps
Compare the description of your business’s ideal or target state with its present state, as illustrated by the data. This lets you find the gaps that exist. For an assessment of employee productivity, this may be the difference between the quantity and quality of work your staff does, and what you aim for them to produce.
Get beyond this stage to analyze the gaps, and find out what could be causing or sustaining it. In the case of the bakery we cited earlier, the production gap could exist because there aren’t enough workers, equipment, or raw materials to make more bread.
You may have to investigate a little more to unearth the causes of the gap (or gaps) you have identified.
4. Draw Up a Course of Action
When you know what the gaps are and what causes them, you will be able to set out a course of action for dealing with them. Do you need to hire more workers for your bakery? Do your employees require training to raise their productivity? Is there some marketing strategy you could deploy to boost sales?
Bear in mind the costs of implementing your proposed solutions. Which one of the solutions represents the best combination of low cost and high effectiveness for you?
Set dates for the realization of your goals as well. This makes goal-tracking and evaluation easier.
Your have more chances of succeeding with your business increase when you are deliberate about planning and executing strategies for growth. The gap analysis is one tool you should have in your kit if you want to entrench facts-driven planning in your enterprise. With it, you can get your business closer to the place you’ve always wanted it to be.
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