Corporations rely on “gap analysis” to make sure that the business is running well and even make room for growth. Gap analysis refers to the process that a company goes through to compare its actual performance with its goals to determine whether it is meeting expectations and using its resources efficiently. A business management team is usually responsible for conducting the gap analysis, after which they can create a tailor-made action plan to fill the performance gaps and move the organization forward.

It usually consists of four steps:

1.) Outline and define goals

2.) Measure actual performance against targets

3.) Analyze the data

4.) Compile a performance report

A gap analysis can also benefit you as an investor. When you apply this process to your personal finance, you can better manage it and meet your goals.

Examples of GAP analysis

  • An e-commerce company, Company A, let’s say Reulala, sells bags online. They have been getting a lot of customer complaints, so the team performed a gap analysis. They discovered that the current performance does not meet its stated goal which is to provide top-notch customer experience. They failed to scale support technology as well as staffing to match the company’s growth, resulting in declining customer service quality. Through their gap analysis findings, they sought to improve their customer service, hiring more people and purchasing the necessary equipment and customer service software.
  • A delivery service company, Company B, has been plagued with numerous customer complaints of packages arriving late. After performing a gap analysis, they were able to find a difference between the current process and the company’s objectives. They were also able to map out an optimized process which cuts down on delivery time, reducing costs and mitigating risks.

How does GAP analysis affect investing?

If gap analysis is not in your financial review routine, maybe it’s time for you to include it. Adhering to the four steps outlined above can help you determine your goals, where you are now, and what you should do to bridge the gap between the two. 

The first step in your finance gap analysis is identifying your personal goals, which you can base on your needs and priorities, as well as your investment preferences and tolerance for risk. Next, assess your current standing. What are your assets? How much is your net worth? Do your investments match your risk tolerance? Do you know what your costs are?

The third step is creating an action plan. Go back to your data, then map out a process to bridge the gap between your current standing and your financial goals. You may want to get the help of a qualified financial advisor to determine which approach is best for you.

The final step is the report. You need a written record that you can always refer to check your progress. You can also use these documents to compare and contrast data and growth throughout the years. The way to optimum personal financial health requires awareness of your strengths and weaknesses. Performing a gap analysis is the best way to make sure that you are on track to achieving your goals.  

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