Gap analysis is a simple but useful tool that helps individuals and businesses achieve their objectives and improve their performance. It is a study that enables an entity to find ways on how to “bridge the gap” between the actual and the desired.
Gap analysis has many applications. Oftentimes, it is used in product marketing and in business resource assessment. However, individuals can also use this as an aid to effectively plan and achieve one’s financial goals.
Let’s try to learn more about gap analysis and discover how it can help us in business development and personal finance.
Gap analysis begins by asking yourself two basic questions:
- Where are you now?
- Where do you want to be?
In answering these questions, one needs to be as detailed as possible so it will be easier to come up with realistic plans of action. Study your current situation and determine how you are presently performing. Afterward, write down your desired outcome or goal. Doing so will give you a clear view of how far you actually are from your objectives.
Let’s perform a simple gap analysis for a clothing apparel retail store. Below is a sample of the current situation of the business. After each scenario, the desired goal is then given:
Current: Sells an average of 50 items a day.
Goal: Sell at least 80 items a day.
Current: Customer base is mostly female.
Goal: Achieve equal sales from both male and female customers.
Current: Sales performance usually drop during 3rd quarter of the year.
Goal: High sales performance all throughout the year.
After clearly stating your present and your desired future, the next step is to analyze each item and find ways on how you can close the gap. In our example above, the owner can do the following steps to improve business performance:
- Train staff so they’ll have better sales and marketing skills.
- Come up with an incentive program to motivate salespeople.
- Perform a study to determine male market clothing preference.
- Develop or acquire products that specifically cater to male consumers.
- Determine reason for sales performance drops during the off-peak season.
- Increase marketing, promotions and advertising campaigns during lean months.
Furthermore, one can employ Igor Ansoff’s Product-Market Growth Matrix to strategically close the gap for marketing and business performance:
- Increase market penetration
- Conduct product development
- Perform market development
- Consider product and market diversification
Lastly, after implementing your strategies, it’s important to then measure how much the gap has closed. Only by monitoring your progress can you determine which courses of action works best for your business.
How about personal finance gap analysis?
It’s basically the same. Know where you currently are by calculating your net worth. If your goal is to become a millionaire, then gap analysis can help you see how far you are from becoming one. Hopefully, after seeing the big picture, you can then come up with a plan on how you can achieve your goal. Perhaps you could learn how to invest or maybe start your own business.
Gap analysis is a straightforward and effective way to give your business and yourself a sense of direction. It also provides an opportunity for you to measure the proficiency of your decisions and actions towards achieving your goals.
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Wikipedia, The Free Encyclopedia. “Product-Market Growth Matrix“. July 14, 2008.
Photo courtesy of bigmikelakers
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