A business must identify opportunities before they can reach their full potential. They must know where they stand in terms of their goals before they can achieve them.
The difference between where a company actually is and where they desire to be is called a “gap” and “gap analysis” is a technique used to identify and bridge the gaps.
Sherman Oaks Accounting & Bookkeeping powered by One Source Services has gap analysis specialists who examine where businesses currently are, ask them where they want to be in the future, and then give them a roadmap to get there. Plus, we are always available to keep you on track or offer new routes when needed.
Gap analysis assesses current vs. potential performance and makes it possible for businesses to seize short and long-term goals sooner by identifying how assets and resources are being utilized, or perhaps underutilized.
It empowers a company to develop and implement a plan that effectively eliminates gaps between what they want to achieve and what they are currently doing.
For example, let’s say a new hotel opened next to an established coffee shop. The hotel inspired the coffee shop to expand their local clientele and bring in the out-of-town hotel guests. An effective gap analysis would determine steps the coffee shop should take to achieve that goal. Some changes might include redesigning the menu to be more appealing to hotel guests, altering the coffee shop’s hours to be more convenient for travelers, hiring more staff to accommodate new hours and increased business, etc. The analysis would also create plans for implementing these changes.
It analyzes: CURRENT STATE > FUTURE STATE > GAP > IMPROVEMENT
Look at where you are, where you want to be, identify the gap and then make a plan to bridge it.
It might be tempting to work on all of your goals at once, but resist that mistake; it rarely works out and you will stretch your resources too thin. Instead, prioritize and work on gaps that will have the largest immediate positive impact.
Sherman Oaks Accounting & Bookkeeping powered by One Source Services offers in-depth gap analysis and process overview services.
To get you started, we developed a simple 6-step checklist for self-guided gap analysis:
Step 1-First identify a topic to conduct your gap analysis on. It can be anything including product development, cost reduction, revenue generation, and so on.
Step 2-Determine where you currently are on the selected topic. List all the attributes that play a role in the area that you are analyzing. The attributes can be quantitative (numbers) or qualitative (statements). The idea is to be specific and factual while identifying possible weaknesses. Data may be collected from many sources including documents, interviews, brainstorming sessions, activity observations, and more.
Step 3-Identify where you’d like to be over a specific time frame. For example: do you want to add two new products to your catalog over the next twelve months? Or, do you want to increase sales by $50,000 over the next quarter? You can be very specific or you can be more general, for instance setting a goal to start selling on Amazon.
Step 4-Identify and list the gaps between your current and future states. Record all the elements that contribute to each gap; it can be either quantitative or qualitative. Then, ask yourself why each gap exists. The list must be objective, specific, and relative to the topic or it will not be useful.
Some people use the “Five Whys” system to brainstorm gap causes. It explores cause-and-effect relationships and determines the root of a problem by repeatedly asking “Why?” and building each question from the last. For example, Why are customer’s orders shipping late? Because manufacturing is not meeting production deadlines. Why is manufacturing not meeting production deadlines? And so on and so forth. It may only take a few Why’s to determine where the process is breaking down. Here is a diagram created by Shopify to further explain:
Step 5-Make realistic plans to bridge the gaps. Collaborate with essential staff and identify how to reduce each gap. Establish implementation dates for each action. Conduct an inventory of what you currently have and what you will need to tackle each gap. Include a potential budget for each section. The “6M’” system below might help identify necessary resources:
–Manpower: The human resources you will need
–Method: The processes you will need
–Metrics: The measurements you will need
–Machines: The technology you’ll require
–Materials: What you’ll need (from raw materials to marketing collateral)
–Minutes: How much time you will need to reach your goal
Step 6-Regularly conduct follow-up collaboration meetings daily, weekly, and bi-weekly to assess your progress and determine which steps are proceeding or complete.
A gap analysis should find solutions to problems that are holding your business back from achieving your goals, whatever they may be.
The process involves comparing your current actual performance to your desired performance and can also be used to find gaps relative to your competition by benchmarking your results against industry averages.
There is no right or wrong way to a do gap analysis. It can be done on a strategic or operational level, analyzing overall business direction and that of the industry or going deeper into a specific business process. It all depends on what your objectives are.
The intent is to create a tidy list of problems or gaps that exist in your current operation. The process should increase your understanding of why the problems exist and identify solutions and implementation costs to close the gaps.
Having actual hard data to base your decisions on is invaluable.
Sherman Oaks Accounting & Bookkeeping powered by One Source Services would love to hear about your gap analysis experience. We are available for guidance if you need it and we are passionate about this process if you would like to dig deeper.
Contact us and schedule a goal-setting session today!