Gap Analysis a Boost for Business in a Slow Market
Builders who are feeling the squeeze of slowing sales and production numbers should consider conducting a gap analysis to find other key areas of their business that, when operating at full efficiency, can help to bridge the gap during tough times, according to Quality Matters, the e-newsletter of the NAHB Research Center's National Housing Quality (NHQ) program.
“If you are not achieving your objectives for your business, a gap analysis is one of the simplest tools available to evaluate all the factors that might be standing in the way,” the Research Center says.
A gap analysis makes a basic comparison between a company’s current processes and those that need to be implemented to achieve the desired results.
Quality management experts from the NHQ program recommend using key performance indicators such as targets for profit margins, new home construction volume, budget variances, overhead percentages, sales and marketing costs, customer referrals and overall customer satisfaction ratings to set new business goals and tune up quality management processes that don’t meet established standards.
Builders can refer to their business plans for additional guidance on setting specific guidelines for their companies.
“For example, if you are missing your profit margins, a gap analysis show you how to break down costs into smaller increments and compare them with industry guidelines or averages available from organizations such as NAHB,” the Research Center says.
“If your numbers deviate significantly from other similar-sized builders, perhaps you are not looking at the total costs,” according to the center. “There are often underlying costs that occur with quality-related fixes that can negatively impact your profit margins. The high costs of warranty service work can be a double whammy since it costs you time and money and can impact your reputation with customers in the long run.”
Builders who aren’t getting enough customer referrals can determine the root cause by taking a fresh look at the sales process, superintendent and customer interactions and the warranty service process to determine if the sales staff is asking the right questions. When referral rates and customer satisfaction scores are low, a gap analysis is essential to finding the answers.
“After reviewing areas of your business plan to identify practices and procedures (or the lack thereof) that are preventing your company from being successful, prepare a list of items that can be implemented, redesigned or documented better,” the Research Center advises. “This will help verify that tactical decisions are aligned with overall corporate goals and can have a substantial effect on the bottom line.
For more information on getting started with a gap analysis, visit the NHQ Web site.