Urban water systems are still in their infancy regarding the transition toward a circular economy, despite the sporadic successful examples worldwide. This paper was aimed at analyzing the preparedness of four water utilities in Bulgaria for the implementation of circular economy principles and solutions. These utilities provide water supply and sewerage services to about 30% of the population in Bulgaria. SWOT analysis was used as a core tool. Publicly available data such as nonrevenue water, pressure management, energy demand, network digitalization, and sludge utilization were used to explore the internal factors. The external environment was considered through the legislative and socioeconomic framework, climate change, etc. Finally, the credibility of the conclusions was verified in workshops with the water utilities. The key positive outcomes were that the external factors favor the shift to circular systems, while the major weakness, i.e., the aged infrastructure, is actually a good opportunity for the implementation of modern and circular solutions. The efficient collaboration of water utilities with other actors is a precondition for the development of a sustainable market for “circular” products.