Primary stakeholders are key players whose work impacts the success of the business and who, in turn, are impacted by your business’s successes and failures. These can be owners, employees, customers, fulfillment partners, lenders, and more.
Even for very small businesses and sole proprietorships, strong relationships with customers, partners, vendors, and other stakeholders can play a critical role in business success. According to a Talker Research survey of 1,000 small business owners, 79% considered a trusted network of partners and vendors important to their success. In fact, more survey respondents said good business connections contributed to their performance than cash flow in the early stages of their business.
In this article, you’ll learn who stakeholders are, the importance of stakeholder relationships, and the differences between primary and secondary stakeholders and internal and external stakeholders.
What are primary stakeholders?
A stakeholder is any person or group with an interest in the benefits or harm that may result from what happens to a business or project. Primary stakeholders are people or groups who have a direct, vital, symbiotic relationship with an organization, and are the most affected by the success or failure of the business or project. They include business founders and owners, directors and executives, employees, customers, suppliers and manufacturers, vendors and fulfillment partners, investors and equity holders, and lenders and creditors.
This category includes both internal stakeholders who are directly involved with the organization and external stakeholders. Both internal and external stakeholders have a vested interest in the company’s actions and outcomes; internal stakeholders have a more direct stake and have greater influence over the company’s day-to-day operations. Owners, executives, and employees are examples of internal stakeholders.
External stakeholders may still be greatly affected by a company’s outcomes, but in a less direct way, and they don’t have internal influence over the company’s day-to-day operations. External stakeholders include customers, suppliers, vendors, fulfillment partners, investors, and creditors.
Stakeholders differ from shareholders. Stakeholders are a broader category of people with a vested interest in the company. Some stakeholders are also shareholders, meaning they have a direct financial interest because they invested capital by buying stock or equity. For example, a customer would be a primary stakeholder of a company they patronize. But they’re not shareholders unless they buy a share of that company.
Types of primary stakeholders in a small business
- Founders and business owners
- Employees
- Customers and users
- Suppliers and manufacturers
- Fulfillment partners
- Investors and lenders
These are the main types of primary stakeholders you’ll come across in a small business:
Founders and business owners
The top leaders and creators of a company typically have the greatest influence on daily operations, and they also have the most to lose or gain. Financially, founders, board members, and owners may have put up their own capital to start the business, used their assets as collateral to secure a loan for expansion, or persuaded investors who expect returns in exchange for their investments. They have often put in the most time, energy, and effort to launch the business.
Employees
A company’s employees are the lifeblood of an organization, from executives and directors to managers and their direct reports. The business and its employees are heavily dependent on each other: Employees perform the labor required for the company to succeed, and in exchange, receive pay and benefits.
Some business leaders view their employees as the most important stakeholders, and they make major decisions about the company based on this mission.
One such leader is Peter Dering, founder of the travel gear and camera accessories company Peak Design. “The stated purpose of Peak Design is for the employees of Peak Design to live happy and meaningful lives,” Peter says on an episode of the Shopify Masters podcast. This purpose shapes every decision he makes, including relying on crowdfunding rather than traditional venture capital to launch and expand the company.
“Could we advance our cause further if we raised [capital]?” he says. “Yes, potentially, but it would add pressures on the business that are ones we haven’t had before—and it very well could change the culture, which is a very employee-forward culture. I’m not sure you get to maintain that purpose and really live by it when you’ve got a group of private equity investors who are like, ‘Clock’s ticking.’”
Customers and users
The people who buy and use the company’s products drive revenue and demand, making it possible for the company to sustain and grow over time. Without customers, there’s no business. In exchange, customers and users seek products that satisfy their needs and provide value. A relentless customer focus can help companies stay abreast of what their user base wants, inspire innovative new products and services, and shape their messaging.
Byron and Dexter Peart kept this in mind when they launched Goodee, an online marketplace for home items. The twin brothers believe people want to make better, more impactful purchasing decisions but don’t necessarily know where to begin. They decided to provide value to customers by vetting products in a world of overwhelming choices.
If an item appears on Goodee’s marketplace, it reflects the founders’ mission of supporting good people, good design, and good impact. Customers know they’re making a responsible choice, and Goodee has already done the heavy lifting for research. “In this world of marketplaces, it’s incumbent on us to really help the customer with their buying decisions,” Byron says on Shopify Masters. “If we can help them, they will ultimately make hopefully better choices, and if they make better choices, it’s better for all the stakeholders.”
Suppliers and manufacturers
These external stakeholders provide the raw materials, inventory, or services needed for daily operations. Suppliers and manufacturers can impact companies based on their ability to reliably supply goods and services at prices the companies can afford; companies affect these third parties by choosing whether to give them business.
At Taza Chocolate’s factory, the mission is literally written on the wall: “To make and share stone-ground chocolate that is seriously good and fair for all.” Cofounder Kathleen Fulton says this includes Taza’s cocoa farmer suppliers, and the company works hard to ensure their direct-trade cocoa sourcing is “good for them, good for us, good for our customers.”
Fulfillment partners
Fulfillment partners are the operational bridge between a business and its buyers. Fulfillment partners handle logistics like storing inventory, packing orders, and shipping products to a customer—whether that’s an end user for direct-to-consumer sales, or to other buyers who go on to sell the products in their own storefronts. In return, fulfillment partners depend on the company for reliable revenue that supports their own businesses.
Fulfillment is part of what Goodee offers. By providing a platform that handles logistics like ecommerce operations and shipping, Goodee allows artisans to focus on their craft rather than struggling to do it all on their own. The founders view their business as a community effort that both requires and supports an entire partner ecosystem: a symbiotic collaboration of stakeholders that Byron describes as “a bunch of people working together to lift this boat.”
Investors and lenders
This stakeholder group includes investors who own shares or equity in the company and debt holders like banks. Investors and lenders have a direct financial interest in the company’s outcomes: They provide money to fund operations and expect to receive money in return at a later date. A company may depend on these funds to launch or operate, but investors and lenders also depend on the company because their financial return depends on the company’s future outcomes.
Investors may be those who purchase stock in a company traded on a public stock exchange, or they could be angel investors or venture capitalists who provide funds to newer companies in return for an equity stake. They regularly receive financial reports and can influence organizations in various ways, including through shareholder voting powers.
Lenders like banks provide money that is recorded as debt on a company’s books, and these creditors have contractual rights that can influence a company’s actions. For example, a bank lender can dictate how a company spends loan proceeds—such as expanding into a specific new market or launching a new product line—and when the loan needs to be repaid with interest.
Primary vs. secondary stakeholders
Primary stakeholders are people or entities that are directly involved with a company’s daily operations and are more directly affected by those decisions too. Secondary stakeholders are indirectly involved or affected, often influencing the broader social or regulatory environment in which the company operates.
Examples of secondary stakeholders include the local community where a company or project is based, government agencies and regulators, trade unions, media, competitors, and special interest or activist groups.
Primary stakeholders FAQ
Who are primary and secondary stakeholders?
Primary stakeholders are people or groups who have a direct and vital relationship with an organization, and they are the most affected by the success or failure of the business or project. Secondary stakeholders are indirectly involved, as they influence factors like the broader social or regulatory environment in which the business operates.
What is an example of a primary stakeholder?
Examples of primary stakeholders include business founders and owners, directors and executives, managers and other employees, customers, suppliers and manufacturers, fulfillment partners, investors, and lenders.
What is a secondary stakeholder example?
Examples of secondary stakeholders include the local community where a company or project is based, government agencies and regulators, trade unions, media, competitors, and special interest or activist groups.
Is an employee a primary stakeholder?
Yes, employees are primary stakeholders, as they have a direct relationship with the organization and are among those most affected by its success or failure. Within that category, employees are also internal stakeholders who have greater influence over the company’s daily operations.
