Improving your business should be an ongoing process, not just something you do before selling. A gap analysis is a smart way to identify areas for improvement and optimize your operations. After all, knowledge is power, and knowing where your business stands allows you to make informed decisions.

A gap analysis helps you identify where your business is now and where you want it to be. By defining the “gap” between these two points, you can develop a plan to move forward efficiently. Depending on your business size and focus area, this process can take some time, but it’s worth the effort.

There’s more than one way to complete a gap analysis, and the 4 main types are:

Strategic (Performance Gap): Focuses on why key goals or milestones from your business plan aren’t being met.

Product (Market Gap): Assesses how your business compares to competitors regarding sales, market share, and projections.

Manpower (Team Gap): Review staffing levels and determine whether you have the right team size to run your business effectively.

Profit Gap: Compares actual profit with projected profit goals, highlighting areas for financial improvement.

How to conduct a gap analysis

First, choose the area of your business that needs the most attention. If several areas require improvement, focus on the one with the most immediate impact. Profit and sales performance are key areas, especially when preparing for a sale.

Use data such as KPIs and historical records to back up your analysis. It’s best to start small, focusing on one part of your business rather than trying to overhaul everything at once. If you’re confident, look ahead to your competitors and assess where you may need improvements in the future.

Steps to executing a gap analysis

Gather Business Data: Collect KPIs, historical performance data, team member feedback, and customer insights. This will help you understand both the challenges and what’s working well.

Define Your Goal: Be clear and realistic about what you want to achieve. This could be increasing sales, improving service turnaround times, or reducing costs.

Develop a Plan: Once you’ve identified the gap and gathered the necessary data, create a step-by-step plan to address the issues. Set a timeline and measurable outcomes.

Evaluate the Size of the Gap: Determine the gap’s significance. For larger challenges, you may need to overhaul key processes or seek external support through change management services.

A gap analysis gives you the insight needed to optimize your business and stay competitive. Use it to your advantage, especially when preparing for a sale. It not only helps you address challenges but also shows potential buyers that your business is well-managed and continuously improving.

Most importantly – gap analysis will offer you a solution and an answer if you can’t pinpoint one yourself. If the answer is glaring out at you and can be addressed with some pivots, apply those rather than undergoing a gap analysis (for instance, you may be trying to fill a key business role, and when this position is assigned, many of these performance issues might balance out).

If it’s your first time doing this exercise for your business, creating a template that works for you and your team is worthwhile.