In this soft housing market, builders and trades alike are feeling the squeeze of declining sales and slowing production numbers. But numbers don’t always tell the full story. There are often other key areas of your business which, when operating with optimum efficiency, can help to bridge the gap during tough times.

If you are not achieving your objectives for your business, a gap analysis is one of the simplest tools available to evaluate all factors that might be standing in the way. A gap analysis is a basic comparison between a company’s current processes and those that must be implemented to achieve the desired results. Quality management experts from the NAHB Research Center’s National Housing Quality (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. Refer to your business plan for additional guidance on setting specific objectives for your company.

For example, if you are missing your profit margins, a gap analysis allows you to break down costs into smaller increments and compare them with industry guidelines or averages available from organizations such as NAHB. If your numbers deviate significantly from other similar-sized builders, perhaps you are not looking at the total costs. 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, money, and can impact your reputation with customers in the long run.

Not getting enough customer referrals? Determine the root cause by taking a fresh look at the sales process, superintendent/customer interactions, and the warranty service process to determine if your 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. 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 how to get started with a gap analysis in your company, visit www.nahbrc.org/quality.

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