What is a Stakeholder?

New founders often fall into a semantic trap. They use the words shareholder and stakeholder interchangeably. While they sound similar, confusing the two can lead to catastrophic strategic errors.

A Stakeholder is any person with an interest or concern in a business. This definition is intentionally broad because the radius of a startup’s impact is wider than you think. It includes anyone who can affect or is affected by the actions of your company.

If you only listen to the people who own stock, you are ignoring the vast majority of the people who determine whether your business lives or dies. Managing a startup is effectively an exercise in stakeholder management.

To manage stakeholders, you first have to identify them. They generally fall into internal and external categories.

Internal Stakeholders:

• Employees: They bet their careers on you. They are stakeholders in the culture and stability of the firm.
• Managers: They are stakeholders in the operational efficiency and resource allocation.
• Owners/Shareholders: They are stakeholders in the financial return.

External Stakeholders:

• Customers: They rely on your product to solve a problem. If you fail, their business or life suffers.
• Suppliers: They rely on you to pay your invoices so they can pay their own staff.
• Government: Regulators are stakeholders in your compliance with the law.
• Community: The local area where you operate is a stakeholder in your environmental impact and hiring practices.

The distinction here is critical. All shareholders are stakeholders, but not all stakeholders are shareholders.

A shareholder has a financial claim on the company. They own equity. Their primary motivation is usually the increase in value of that equity. They want profitability and growth.

A stakeholder might not own a single cent of equity. However, they can still destroy your company. If you anger your community stakeholders by polluting the local river, they can shut you down via regulation. If you anger your employee stakeholders by creating a toxic culture, they can leave and take your intellectual property with them. You cannot view the business solely through the lens of the stock price.

The hardest part of being a CEO is that stakeholder interests are rarely aligned. In fact, they are often in direct conflict.

Consider a scenario where you want to raise prices to increase margins.

• Shareholders love this. It increases profit.
• Customers hate this. It increases their costs.
• Sales Employees might hate this. It makes their job harder.

Or consider a scenario where you want to automate a factory line.

• Shareholders approve. It lowers labor costs.
• Employees disapprove. They fear job loss.
• Community disapproves. It lowers local employment.

Your job is not to make everyone happy. That is impossible. Your job is to balance these tensions so that the system remains stable.

For startup founders, there is one silent stakeholder group that is often ignored. Your family.

Your spouse and children are major stakeholders in your venture. They do not sit on the board. They do not vote. But they invest their time, their emotional energy, and often their family savings into your dream.

If you neglect this stakeholder group, the personal cost can be devastating, which inevitably impacts your ability to run the company. You must view your personal support system as a critical part of the stakeholder map.