GAP analysis: how to climb, rung by rung

What it is

A gap analysis has three columns: where you are, where you want to be, and the gap between them. You then turn each gap into an action with an owner and a date. On this site “where you are” is today’s sub-level and “where you want to be” is your target, so the analysis follows the ladder rung by rung.

When to use it

• After the self-evaluation has suggested your target level, to plan how to get there from where you are today.
• Before a climb that needs a lot of money, such as moving from shop to distributor or from job work to own brand.
• Every six months, to check the gaps are closing.

How to do it

1. Find today’s sub-level. Read the sub-levels of your level (the tables below link to each) and pick the one that describes what you do now, not what you want.
2. Pick the next rung, not the last one. Climbing one rung at a time is safer and easier to fund.
3. Compare the two rungs on money, risk, control and skills. The tables below show money and what closes the gap; the level pages have the rest.
4. Turn each gap into an action, with a number where you can, an owner and a date.
5. Repeat for the next rung once the first gap is closed.

Worked example: from shop to distributor

What	Today (1.2 shop)	Target (1.3 distributor)	Gap and action
Money	₹12,00,000 in stock	₹32,70,000 working capital	Raise ₹20,70,000: channel finance or a bank limit
Customers	Walk-in shoppers	Shops across a territory	Build a beat plan and hire one salesperson
Skills	Retail selling	Collections, delivery routes, stock control	Learn the stock and cash cycle
Control	Your own shelf	The brand’s territory and terms	Read the distributor appointment terms carefully

See the stock and cash cycle for the working-capital arithmetic and channel finance for funding it.

The ladder, rung by rung

For each level, the money each rung usually needs and what usually closes the gap to the next one. These come from the sub-level descriptions, which are a first draft and still being refined.

Level 1: Trader

Rung	Money today	Money at the next rung	What closes the gap
1.1 No-stock seller → 1.2 Shop / retailer	Almost none: no stock and no shop. You may spend on a website, listings, advertising or your own time.	Small to moderate: rent and deposit for the shop, fittings, and the first stock.	Find products or services that sell again and again, then start holding some stock yourself or building your own customer list, so you control quality, delivery and margin.
1.2 Shop / retailer → 1.3 Wholesaler / distributor	Small to moderate: rent and deposit for the shop, fittings, and the first stock.	Moderate: a godown, delivery vehicles and salesmen, and above all working capital for stock and for the credit you give shops.	Learn which items turn fastest, earn credit from suppliers, and start supplying other shops, not only final customers.
1.3 Wholesaler / distributor → 1.4 Super stockist / C&F	Moderate: a godown, delivery vehicles and salesmen, and above all working capital for stock and for the credit you give shops.	Large: big warehouse space, transport, systems and staff. A super stockist also needs working capital for bulk stock.	Tight credit control, more brands or a bigger territory, and the warehouse space and working capital to supply other distributors.
1.4 Super stockist / C&F → 1.5 Importer / exporter	Large: big warehouse space, transport, systems and staff. A super stockist also needs working capital for bulk stock.	Large: big orders, advance payments or letters of credit, shipping and warehousing.	Proven systems and finance for large volumes; then buying directly from abroad, selling abroad, or running several regions.

All level 1 sub-levels in full

Level 2: Dealer

Rung	Money today	Money at the next rung	What closes the gap
2.1 Sub-dealer → 2.2 Authorised dealer	Small to moderate: a small outlet and some stock, far less than a main dealership.	Moderate: a showroom to the brand's standards, a security deposit, and the minimum stock the brand asks for.	Build steady sales and a clean payment record, then apply to the brand for your own authorised dealership.
2.2 Authorised dealer → 2.3 3S dealer	Moderate: a showroom to the brand's standards, a security deposit, and the minimum stock the brand asks for.	Large: showroom, workshop equipment, trained technicians and spares stock.	Add service and genuine spares, where the brand allows it, to earn again from the customers you already have.
2.3 3S dealer → 2.4 Dealer group	Large: showroom, workshop equipment, trained technicians and spares stock.	Very large: several showrooms and their stock, and a management team.	Run one outlet profitably and with good systems, then open more outlets or take on a second brand.
2.4 Dealer group → 2.5 Master franchise	Very large: several showrooms and their stock, and a management team.	Very large: the fee for the rights, a regional team, and often outlets of your own to prove the format works.	Build managers and systems that run outlets without you, then seek rights to a whole region.

All level 2 sub-levels in full

Level 3: Manufacturer

Rung	Money today	Money at the next rung	What closes the gap
3.1 Job work → 3.2 Contract manufacturing	Small to moderate: machines for one or two processes and a shed. No raw-material stock, because the customer supplies the goods.	Moderate to large: production lines, testing, quality certifications and raw material.	Add processes and quality systems, buy material yourself, and start delivering finished parts.
3.2 Contract manufacturing → 3.3 Tier 2 / Tier 1 supplier	Moderate to large: production lines, testing, quality certifications and raw material.	Large: precision machines, tooling, testing equipment, and the time and cost of customer approvals.	Win long contracts that need engineering work and customer approvals, so that you become hard to replace.
3.3 Tier 2 / Tier 1 supplier → 3.4 Commodity / bulk	Large: precision machines, tooling, testing equipment, and the time and cost of customer approvals.	Large to very large: plant, land, power connection and raw-material stock.	Design and engineering ability, plus the scale to carry approval costs; or a standard product of your own sold to many buyers.
3.4 Commodity / bulk → 3.5 Own brand (OEM)	Large to very large: plant, land, power connection and raw-material stock.	Very large: a factory or contract manufacturers, plus brand building, a dealer network and working capital.	Build a brand that buyers ask for by name, so you can charge more than the commodity price.

All level 3 sub-levels in full

Level 4: New products and services

Rung	Money today	Money at the next rung	What closes the gap
4.1 Licensee → 4.2 Product startup	Moderate to large: the licence fee, a plant to scale up the process, and building a market.	Moderate to large: product development, an early team and the launch, often with money from investors.	Improve the technology yourself and build your own product and engineering team.
4.2 Product startup → 4.3 Own R&D + patents	Moderate to large: product development, an early team and the launch, often with money from investors.	Large: research staff, laboratories, testing, patent filings, and a long wait for revenue.	Do your own research and development on the hard part, and protect it with patents or closely held know-how.
4.3 Own R&D + patents → 4.4 Deep tech	Large: research staff, laboratories, testing, patent filings, and a long wait for revenue.	Very large and long-term: usually several rounds of investment, grants or both.	Deeper science, or technology that other companies build on, backed by long-term funding.

All level 4 sub-levels in full

Common mistakes

• Starting from the target instead of today. Be honest about the sub-level you are at now.
• Skipping rungs. Jumping from shop to super stockist, or from job work to own brand, multiplies the money and risk gap.
• Only counting money. Skills, systems and people gaps sink climbs too; a McKinsey 7-S check helps.
• No owner, no date. A gap without an action is just a list.

Related: SOAR to set the target, and how the levels connect for the common climbs between levels.