How To Do A Gap Analysis

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When corporations want to improve a part of their business, they put together what is known as a gap analysis. This is a process where a company determines where they are, decides where they want to be and then develops ways to fill the gap. A gap analysis is part numbers and part process, and it should be done at various points throughout a project.

Where The Company Is

The first part of a gap analysis is determining where the company is when it comes to the question being answered. For example, the company may want to increase the profit margin on a particular project, so data would be gathered to determine the current margin. In order for a gap analysis to be successful, its purpose must be very focused. A gap analysis that asks a broad question such as wondering how the company can increase its overall profit margin is going to become too complicated to be useful.

Where The Company Wants To Be

For the example we have started, let’s say that the company has determined that their current profit margin is 10 percent. To decide where the company wants to be with its new profit margin, it cannot just throw out a random number. The goal in a gap analysis is based on information gathered from competitors, consumers and other industry trends.

The company may find that it can boost its profit margin to 20 percent if it makes the right move. But it could also find out that 14 percent is more realistic. The last thing a company wants to do is set a goal that would utilize resources and not get results. The gap analysis is done to give justification for moving ahead with a project, so it needs to provide actionable data.

The Gap

The final part of a gap analysis is providing action steps for achieving the goal. These need to be very specific steps that outline exactly what must be done to close the gap. This information would include projected expenses, projected profits and any operational changes the company would need to make. For example, the company might determine that a new warehouse in a different city would be necessary to raise the profit margin to 20 percent. The gap analysis will explain why this is necessary, and then give a profit analysis to show how much extra profit the new warehouse would generate.

An Ongoing Process

A strong gap analysis is often required to kickstart a project and get the company to put up funding. But the project should include milestone dates where new gap analysis reports are generated to mark progress and make any changes that need to be made to make sure the goal is achieved.

Major projects in the corporate world all start with a gap analysis. This is a very comprehensive report that shows where the company is on a specific issue, and what the company needs to to achieve its goals for that issue on a pre-determined timeline.