What is the first step an entrepreneur should take to determine if a business opportunity is realistic?

The first step an entrepreneur should take to determine if a business opportunity is realistic is to determine how much capital is required. This is crucial because understanding the financial aspect is fundamental to the feasibility of any business idea. If the required capital is beyond what the entrepreneur can raise or secure, it immediately puts the business opportunity at risk, regardless of its potential profitability, target market, or competition.

Establishing capital requirements helps the entrepreneur to gauge whether the business is financially sustainable and whether it necessitates external funding sources. It sets the groundwork for conducting further analysis, such as evaluating potential profitability or identifying the target market, as these steps often depend on having a clear understanding of the financial resources needed to start and operate the business.

While evaluating potential profitability, identifying the target market, and analyzing competition are all important aspects of assessing a business opportunity, they rely on having an initial understanding of capital requirements to ensure that the venture can be launched and sustained.