What Is a Gap Analysis? Where You Are vs. Where You Want to Be

The Short Answer

What Is a Gap Analysis?

Textbook Definition

A gap analysis is a structured comparison of an organization's current performance with its desired future performance, identifying the specific resources and changes required to close the difference.

In Plain English

It is a measuring tape for your goals. A gap analysis writes down where the business stands today, where your five-year picture says it should be, and how much money, staff, customers, and time it would take to get from one to the other.

Why It Matters

Why Do Big Visions Turn Into Half-Finished Projects?

Starting with the picture is the right order. The trouble comes next. Instead of measuring how far away each goal is, many owners give every goal a small start so none feels left behind. A sign here, a deposit there. Years later there are several beginnings and nothing finished.

A gap analysis compares your current state with your desired state and turns the difference into numbers. It does not shrink the dream. It puts the dream in order, which is also the first move in backward planning from the finish line to today.

Signs you have this problem:

You are spending a little on several big goals at once.
You cannot say how much money any one of your goals would take.
Your plans describe places and dreams but not staff counts or customer numbers.
Customers keep asking for something you have not counted or acted on.
Every goal feels about the same distance away.
You have plenty of starts and no finished expansions.

Spreading effort evenly feels fair to every dream. It just guarantees none of them arrives.

What It Looks Like

What It Looks Like When Every Dream Gets a Coin

From the Fabled Forest · Chapter 4

Veronica, an elephant who runs a day spa called EleWell, had plans for five new resorts plus one sketched on a dinner napkin. Her five-year picture named every place but gave no headcount and no income figure. EleWell brought in about 600 coins a month and kept 150. Since summer, 40 coins a month and about thirty of her hours had gone to small first steps on every project at once.

Doctor Owl drew a table: today on one side, the picture on the other, and the gap measured in coins, staff, customers, and months. Fern, the flamingo who keeps the ledger, added a number she had been quietly tracking: about 22 guests a month asked to stay overnight. Measured one by one, the four resorts with figures totaled 11,200 coins and at least 22 new staff, against six on the payroll. At the current pace EleWell would keep about 9,000 coins in five years.

Only one place was reachable: the lakeside lodge, which already had a building, trainers on staff, and guests asking. The others each got a single missing item written beside them. Veronica rewrote her picture around two locations and a real income figure, and all 40 coins a month went to the lodge.

Veronica's story is Chapter 4 of Strategy for Small Businesses, Book 6 of Dr. Paul's Fabled Forest Business School Series.

The Fix

How to Do a Gap Analysis in 4 Steps

No consultants' jargon required. Just a table, your ledger, and honest numbers.

Write down where the business stands today, in numbers.
Revenue, profit, staff, and customers. Include anything you have been tracking quietly, like Fern's list of guests who asked to stay the night.
Write down where your five-year picture says you will be.
Use your vision statement and its four answers. If the picture has no numbers yet, add them now.
Measure the gap for each part of the picture.
For every goal, write four figures: money needed, people needed, customers needed, and months to get there at today's pace. Many business plan templates already include the start-up cost and staffing tables that make this faster.
Close the nearest gap first.
For the goal you can reach, list what has to change, line by line. For the others, write the single thing each one is missing. Then turn the first gap into long-term objectives with real numbers.

Dr. Paul's Insight

The most common mistake Dr. Paul sees is giving every part of the vision a small slice of money. It feels fair and it feels hopeful, and it nearly always leaves nothing finished. Fund one part enough. Borrowing or bringing in a partner can change the distance, but that is a later decision, and a far better one once you know exactly what gap you are trying to close.

Worked example: Veronica's lakeside lodge gap Current state: 600 coins in a month, 150 kept, 6 staff, about 120 day visits sold a month Cost to open the lodge: 1,200 coins Staff needed: 4 new (Fern and Flora can train them) Overnight guests needed to pay for itself: 30 a month. Already asking: 22 (not yet booked) Money set aside: 40 coins a month, reserve untouched 1,200 ÷ 40 = 30 months to fund the lodge Illustration from the book. All four priced resorts together came to 11,200 coins and at least 22 new staff, against about 9,000 coins kept in five years at today's pace. That is why the lodge went first.

Watch

Watch: Grow on Purpose and Plan for the Future

Dr. Paul explains how his Organize-Plan-Grow approach helps owners who are stuck grow on purpose, plus a short tip on writing future plans into your business plan.

Struggling to Grow Your Business? Use the Organize-Plan-Grow Strategy

Dr. Paul Borosky, DBA, MBA. (4:13)

Business Plan Writer's Tip #37 for Sacramento, CA.: Future Plans in your Business Plan

Dr. Paul Borosky, DBA, MBA. (2:00)

From the Book

Read a Passage From Chapter 4

Chapter 4 · Gap Analysis

Five Resorts, Five Distances: An Elephant’s Measuring Tape

Ridge: a winter road. Coast: a count. Desert: water. Jungle: a visit.

“So they aren’t gone,” said Flora.

“They’re measured,” said Veronica. “That’s different from gone.” She looked at the napkin, with its building on stilts and the waterfall coming out of the roof, and pinned it at the very end of the row. Under it she wrote: A river spa. Missing: everything. Flora laughed, and Veronica laughed with her, and it did not hurt as much as she had thought it would.

Read how Veronica rewrites her picture in Strategy for Small Businesses, Book 6 of Dr. Paul's Fabled Forest Business School Series.

Get the Book on Amazon →

FAQ

Gap Analysis Questions Owners Ask

What are the steps of a gap analysis?

Write your current state in numbers, take your desired state from the five-year picture, measure the gap for each goal, and then list what must change to close the nearest one. That is the whole method.

What should I measure in a small business gap analysis?

Four things: money, people, customers, and time. Those four cover most of what stands between a small business and its next step.

What if the gap is too big to close?

That is useful to know. Write down the single thing that goal is missing and set it aside without throwing it away. Then focus on the gap you can close from where you stand.

Should I borrow money to close a gap?

Sometimes, but decide that after you have measured. Borrowing or taking on a partner changes the distance, and it carries its own costs. You will make a better choice once you know exactly what you would be borrowing for.

Keep Going

Related Foundations

Gap analysis is the fourth of twenty strategy foundations. These pages build on it. New to a term on this page? Every one is in the strategy glossary.

How to Write a Vision Statement

The picture a gap analysis measures against.

What Is Pilot Testing?

Find out whether interested customers will really buy.

What Is Opportunity Cost?

What spreading money across every dream really costs.

What Is Strategic Focus?

Choose a few things to do well and say no to the rest.

Written by Dr. Paul Borosky, DBA, MBA, business consultant and author of Dr. Paul's Fabled Forest Business School Series. Want help measuring the distance between today and your goals? See growth plan and consulting options.

This page is for general educational purposes only. It is not legal, financial, or other professional advice. Dollar figures are illustrations. The Fabled Forest and its characters are fictional. For decisions about your own business, consult a qualified professional.