Definition of Primary Stakeholders

Stakeholders refer to people and other entities who experience some kind of impact from your business activities. Stakeholder groups are either primary or secondary. Primary stakeholders refer to those inside and outside your small business who experience direct effects from how your company operates, for better or worse. A few examples include your staff, suppliers, creditors and community. Knowing how to identify all your primary stakeholders and their unique interests can help you with making the best decisions for your small business.

Tip

You can think of primary stakeholders as people, groups or organizations whom your business directly affects.

Your small business's primary stakeholders include any person or other entity on whom your business's actions have a direct impact and who either will experience benefits or harm as a result. These stakeholders include individuals as well as groups and organizations. They can be internal stakeholders from inside the company, like your employees and leaders, or external stakeholders outside your company, like your customers and suppliers.

Further, primary stakeholders can be classified as social or nonsocial. Social stakeholders include people and organizations involved in your business. On the other hand, nonsocial stakeholders refer to entities such as animals, the environment and generations of people who haven't yet been born.

Secondary stakeholders differ from primary stakeholders in that they do have some influence on the company, but it doesn't occur directly. Instead, they might represent your company's interests in some way without having a direct relationship with you or your employees.

For example, your local government would be a secondary stakeholder since it enacts laws that apply to your business but does not experience a direct impact from your business. A competitor would be another example that indirectly influences your business decisions and operations. Other examples of secondary stakeholders include the general public, media firms and activist groups.

Knowing who your company's primary stakeholders are can help you make business decisions that are fair to all parties involved as well as help you address potential challenges and opposition. At the same time, you'll be able to get insight from more of these stakeholders, improve the likelihood of your business's success and make your organization more credible to the public.

When identifying primary stakeholders, it helps to start looking at those inside your business and those with whom you regularly interact most often. For example, your business partners, owners, employees and managers are all internal stakeholders who see an impact from both your company's good and bad business decisions. Customers – considered external stakeholders – conduct transactions with you and may experience a negative impact if you raise prices or a good impact when you provide quality service. Investors and shareholders also all have a direct financial relationship with you and thus are primary stakeholders.

You can then look at other stakeholders outside your company. For example, your business might depend on a certain vendor to supply inventory, and this vendor can experience harm when you seek supplies elsewhere. At the same time, the local bank that gave you a small business loan stands to benefit or lose from your business's likelihood of repayment. The community as a whole also serves as an external primary stakeholder. Perhaps your company donates money regularly to local nonprofits that help individuals, or your business takes measures to reduce pollution and waste.

Once you've determined your primary stakeholders, you can think about their interests in your business. For example, your owners, investors and creditors are likely most interested in your profits, while your employees want to see the company succeed so that they keep their jobs.

Your suppliers would want a continued relationship with you, while your customers would want to see you offer quality services and products. The local community would want your business to operate in a way that keeps the public and environment safe and healthy.