What is the first step in the cost/benefit analysis process?

The initial step in the cost/benefit analysis process is to identify all consequences. This foundational stage involves determining the potential outcomes of a project or action, which allows you to understand fully what factors need to be analyzed. By recognizing all possible consequences, both positive and negative, you set the groundwork for measuring costs and benefits accurately. This comprehensive view is crucial, as it ensures that all relevant aspects—including indirect consequences, long-term impacts, and potential risks—are taken into account before proceeding to the subsequent steps in the analysis, such as assigning monetary values or estimating future revenues.

Identifying consequences first helps clarify the scope of what you are evaluating, ensuring that the analysis is grounded in real scenarios that will affect decision-making. Once all consequences are identified, you can then assign monetary values to the associated costs and benefits or evaluate risks more effectively. This systematic approach enhances the accuracy and effectiveness of the overall analysis.