What is GAP Analysis?

The GAP Analysis is a Tool that assesses the performance of a certain Company or Business Activity and compares it with How much better could it be doing.

 

Basically, it is a comparison between Reality and What could be.

It can be very useful:

  • To establish objectives.
  • To judge the different Tactics and Strategies used.
  • To do self-criticism.
  • To forecast potential scenarios.

GAP Analysis representation.

 

Although it is a very intuitive concept, it is not an easy Tool to Master.

 

Why?

  • Because if you knew how to do better in the past, you would have done it already.

 

Now we’ll explain how to perform a GAP Analysis.

How do you perform a GAP Analysis?

To develop a proper GAP Analysis, you need 3 things:

 

1. Reliable data on your past results: What have been your results.

  • Or the results you want to evaluate.

 

2. Reliable data on external sources: Your reference to establish how much you can improve.

  • These data should be as accurate and detailed as possible.
    • Results of other companies by activities carried out.
      • They could be also your own results from years ago.

 

3. Identify the main Factors that determine success: For the Business Activity you analyze.

  • These Factors should be tangible.

 

The main mistakes made when developing a GAP Analysis are:

  • Not being rigorous enough.
  • Not being accurate enough.
  • To use vague undefined Factors.

 

We propose you this approach:

GAP Analysis development.

 

If you want to develop a useful GAP Analysis, these Factors should be as defined as possible.

 

GAP Analysis are often developed using vague terms that could be said about any company in any situation:

Terms such as:

  • Improve communication efficiency.
  • Diversification.
  • Effectiveness.
  • etc.

The resulting GAP Analyses are as useful as the results of a horoscope.

 

Let’s see an example:

YouTuber GAP Analysis example

 

Let’s imagine you own a YouTube channel.

 

It is your third year posting videos, but your Subscribers are not growing as fast as you would like.

  • In fact, you are losing Subscribers.

 

You decide to compare your channel to other similar channels that initially had:

  • Similar audience.
  • Similar content.

But they got a lot more subscribers than you did during in the last 6 months.

 

You develop a GAP Analysis, and the result is this:

GAP Analysis – YouTuber Subscribers.

 

How you developed the GAP Analysis

 

1. Your data is reliable since YouTube offers real data.

2. Your competitors’ data is also 100% accurate for the same reason.

3. You have been able to Identify the main Factors that determined success easily:

  • You just analyzed your competitors’ most popular videos and their Views.

 

Conclusions from the GAP Analysis

 

As you can appreciate in the image above, you will have to:

  • Publish more “funny content”.
    • Challenge videos are very popular.
  • Do some “Gameplays”.
    • Even if you are not very passionate about it, people love it.
      • Maybe… you’ll use a funny approach, highlighting how terrible you are at video-games.
  • Collaborate with other YouTubers.
    • You can also bring some friends to your videos.
  • Start developing a stronger “brand-name“.
    • A good intro.
    • A professional logo.
    • Better thumbnails.
    • etc.

Now, you may be wondering:

  • OK. For a YouTuber, developing an accurate GAP analysis is easy… but what about other Businesses where the data is much more difficult to obtain?“.

 

We’ll give you different examples about other Businesses later, but first, we want to highlight why GAP Analysis is a very useful Tool, no matter what your Business is:

Why is GAP Analysis useful?

As we mentioned before, GAP Analysis is very useful because:

 

  • It Forces you to look for the Key Factors of success in a Business.
    • Objective, Measurable and Tangible Factors.

 

  • It allows you to set defined and measurable Goals.
    • As long as you choose the right tangible Factors.

 

  • It highlights how well a Company is doing, at a Glance.
    • Analyzing what the results could have been with an appropriate Strategy, Tactics or Planning.

 

  • It allows you to Forecast potential results.
    • If you improve at the Key Factors chosen.

But, when should you develop a GAP Analysis?

When should you develop a GAP Analysis?

As we mentioned earlier, this is a very helpful tool, not just for Big Companies.

  • That is why we used the “YouTuber” example.

 

You can use it in any kind of situation where you can objectively measure your results.

You can use it for:

 

Your Hobbies.

  • Preparing a marathon.
  • Improving your Golf skills.
  • Increase your Blog’s page views.

 

Your professional career:

  • What job would you like to have in 5 years?
  • What do you need to achieve your desired job position?
  • What salary would you like to achieve? What skill would you need?

 

Improve your Personal Finances .

  • How much money would you like to save per year?
  • What are you spending your money on?

 

And, of course, to improve the results of any type of Business.

  • In this case, you should develop GAP Analysis regularly, to check:
    • The Strategy.
    • Tactics.
    • The Potential of the Business.
    • etc.

 

Now, let’s see some examples:

GAP Analysis examples

As you may already know, we always try to bring the best management tools closer to Entrepreneurs, small Businesses, Professionals… or just anyone trying to improve at something.

  • We believe that these Tools should not be used just by large Corporations.
    • They should be accessible to anyone as they are very helpful.

 

That is why, we have chosen different unusual Businesses where you can develop a GAP Analysis.

Let’s begin:

E-commerce Site - GAP Analysis example

 

 

Let’s imagine that you own an e-commerce Site, where you sell accessories for women.

  • You mainly focus on bags, wallets and neck scarfs.

 

Your last 6 months have been a bit disappointing.

  • Your sales have decreased remarkably.

 

You then decide to develop a GAP Analysis, and the result is this:

E-Commerce Website – GAP Analysis.

 

How you developed the GAP Analysis

 

1. Your own data is a 100% reliable since you track every sale made.

2. The data of your competitors data is relatively accurate since you analyzed:

  • Amazon’s top sales.
  • Results from other professional Sites (Etsy and similar).
    • And comments about their products and service, made by dozens of real people.
      • That information is priceless.

3. You established the main Factors after analyzing:

  • Most popular accessories for women on Amazon.
  • Most rated accessories on different Sites (like Etsy).

Then you compared these rates (popularity and sales) with those of the products you offer.

  • With a simple extrapolation, you have estimated what you could have sold (approximately).

 

Conclusions from the GAP Analysis

 

As you can see in the GAP Analysis, you decide to expand your product catalog with:

  • Silver Bracelets.
  • Collars.
  • Earrings.

In addition, you’ll improve your Customer Service.

  • You have discovered that the Sites with best Customer services sold a 15% more on average.
    • The comments section and the Forums helped you finding out this.

Pub revenue increase - GAP Analysis example

 

In this example, let’s imagine you own a Pub and your profits have decreased in the last few months.

Although you have many clients, your earnings are poor.

  • It is a simple Pub, focused on “cheap” beer.

 

You then start to analyze what your profits could have been if you had done things in a different way:

 

Your GAP Analysis looks like this:

Pub Net Profits – GAP Analysis.

 

How you developed the GAP Analysis

 

1. First of all, you have had to correctly calculate all your Costs, so your earnings are accurate.

  • After this, you could estimate the”Cost Reduction” Factor easily.

2. The external factors have been a bit more difficult to estimate.

    • You had to talk with different Pub owners, study their prices, and ask for a bit of help.
  • This makes these estimates not as accurate as you would like, but it is better than nothing.

3. After all these interviews, you summarized what you considered to be more relevant.

  • What would most affect your potential earnings.
    • In a Pub similar to yours.

 

Conclusions from the GAP Analysis

 

The first action you will take is to start reducing your Costs.

Once you’ve contained them, you’ll start offering easy-to-prepare Meals (Burgers, Hot dogs…):

  • They attract customers and give “juicy” profit margins.

Also, you’ll improve your TV-Sports offer.

  • It attracts a good number of potential customers.

Finally, you’ll offer “higher-quality” beers.

  • The higher the, price, the greater your margin.

Bakery business - GAP Analysis example

 

Now, let’s assume that you own a Bakery.

  • And, as happened in the Pub example, your Profits are decreasing.

 

Again, you decide to develop a GAP Analysis, and the result is this:

Bakery Business – GAP Analysis.

 

How you developed the GAP Analysis

 

1. Your own data is 100% reliable.

  • You have controlled Costs since the Business started.

2. To get “external data” you have had to:

    • Talk to other similar Bakeries.
    • Talk to your suppliers.
    • Study the numbers carefully.
  • Your “external data” is not accurate as you would like, but it is relatively well-supported.

3. After developing this study, you find out what to focus on.

  • The Key Factors you were looking for.

 

Conclusions from the GAP Analysis

 

First, you decide to reduce some Costs.

  • Which is not very complicated for you.

Then, you start offering Coffees and easy-to-prepare Breakfasts.

  • Your place have plenty of space.
  • You can easily move some counters and install 4 small coffee tables.

Finally, you decide to offer some more exclusive Breads.

  • These breads have higher prices, but so are their margins.

Community manager - GAP Analysis example

 

In this final example, we’ll assume that you are a community manager who is having trouble making an impact on Social media.

 

Since you are a very methodical person, you decide to study your results from the last 6 months and develop a GAP Analysis.

These are your results:

Community manager – GAP Analysis.

 

How you developed the GAP Analysis

 

1. Your own data is 100% reliable.

  • Internet data tends to be very accurate.

2. External data is also very accurate.

  • It is not difficult to study other competitors and the results they had over time.
  • Also, it is quite easy to study their strategies, and what made the most impact on social media.

3. You have chosen the key Factors based on what worked best for your competitors.

 

Conclusions from the GAP Analysis

 

First of all, you have to increase your global Activity.

  • Publish more frequently and, on more platforms.

Second, you’ll try to use a fun-content approach.

  • You realized that, funny publications do better.

Third, you’ll also try to be more helpful to your audience.

  • Helpful content is highly valued by users.

Finally, you’ll try to Engage more actively with your audience.

  • Answering their personal questions.
  • Using a more personal approach.
  • Asking them what worries them the most.

Summarizing

The GAP Analysis is a useful Tool that assesses the performance of a certain  Business and compares it with How much better could it be doing.

  • It is a comparison between Reality and Potential.

 

It is very useful:

  • To set Goals.
  • To judge the different Tactics and Strategies employed.
  • To improve future performances.

 

To develop a proper GAP Analysis you need:

  1. Reliable data on your past results.
  2. Reliable data on external sources.
  3. To identify the main Factors that determine success for the Business you analyze.
    • These Factors should be measurable, tangible and well defined.

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