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This week, I was a guest presenter for an MBA Entrepreneur Class at York University. When originally asked to present, I really didn’t know why. After all, I am just a stock guy. But then I realized that, from a corporate perspective at least, I have been through a lot in terms of types of companies I have worked at, transactions, transitions and challenges. So, suddenly I had a few more ideas to present to the class other than some of my favourite stock picks. For budding entrepreneurs, all will likely go through at least a few of these work/corporate transitions in their careers. Here are my thoughts on five corporate scenarios:

Being an employee

Most people, even the most-talented entrepreneurs, are going to start off working for someone else. In fact, having a bad ‘boss’ and doing things only a certain way is often the prime impetus for someone to quit and go the entrepreneur route instead. There are some pros to being an employee — nice benefit packages, paid vacation time, the ability to learn from others and so on — but at the end of the day, you are working for someone else. Everyone is replaceable. You are a salary man or woman, dependent on a boss and the company to keep your paycheque coming. I have worked for good companies and bad companies. I have worked for great bosses and horrible bosses. Making friends at a big company is the best part. Living with a bunch of office politics, and boring, useless meetings is the worst. The Lesson: If you want to be an entrepreneur, you can’t be an employee.

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Going through a start-up

I have been involved in two start-up companies, both very different. In 1997, I joined a start-up mutual fund company, Synergy. We started with $0 in assets to manage. We had a couple of key strengths. One, the initial founder, Joe Canavan, had done it all before at other companies. It was easy to join such a seasoned executive. Two, we had $13 million in capital, provided by a Canadian bank that owned part of the company. As far as start-ups go, Synergy had very good bones. Six years later, we managed more than $1.5 billion in assets, and the company was sold to CI Financial. In 2011, 5i Research was my other start-up, and current company. The genesis was quite different. I had to fund the entire start-up myself, and, for the first little while, I was the sole employee. There were some long hours and lots of stress, but hiring some very smart partners (thanks, Ryan) helped me get through the rough patch. We are not quite a giant conglomerate yet, but we continue to add staff and grow. The Lesson: With any start-up, look for lots of capital or lots of help. It’s pretty tough to succeed without these.

Going through an IPO

In 2008, the company I worked for went public. The IPO process was interesting, and I was involved in the road shows to investors. I was on the board of directors. I became a good salesperson that year, so much so that I never sold any shares in the company in its initial public offering. We went public at $100 per share (adjusted for a reverse split last year). Shares are now $47. Of course, going public two months before a global financial crisis wasn’t exactly good timing. But a public company is much different than a private company. Investors focus on three-month results, rather than a long-term strategy. It felt different after the IPO. Some employees were happy to have sold shares, some were miserable for not (the stock bottomed at $17). Some partners got rich, and left the company, or retired. Even myself, the chairman, was gone three years later. The company did not need capital at the time (IPO proceeds went to initial shareholders). While profitable, I can’t really say it was an enjoyable experience. The Lesson: Despite media hype, not all IPOs are great.

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Acquiring another company or asset

In 2011, just days after founding 5i Research, I bought Canadian MoneySaver magazine, a financial advice magazine that has been now publishing for 40 years. While with the 5i company start-up everything was new, I had now acquired a legacy company with an archaic website and old systems. While readers liked the magazine, the back office was a mess. I hired a consultant to evaluate possible changes. We counted 10 separate steps in order for a customer to buy a subscription to the time of fulfilment. We dropped this to one. We revamped the website at great cost. We acquired this giant computer filled with data, and the founding sellers said if it ever broke it would be “really bad.” We moved everything to the cloud. I really had no idea what I was doing at first. I had never owned a company before, nor published a magazine. I am happy I bought it, but boy it was tough. Shout out to my business partner Lana for getting me through those first two years. The Lesson: Acquisitions can be very difficult, don’t always work, and you’ll find tons of problems you never even expected. Get some help and make sure your acquisition price accounts for all of this.

Being acquired

In 2003, as noted above, my company Synergy Mutual Funds was acquired by CI Financial. It was a nice payday. But, only a handful of Synergy employees moved over to the new company. I was one of them. But I no longer worked with a lot of close friends and partners. CI was a great company and treated me very well, but it was different. Synergy had perhaps 80 people when it was sold, and CI had at least 700. There was bureaucracy — and less fun. We were no longer building and growing a company: it was already built. I lasted two years. Still, from CI’s perspective, the acquisition was a giant success. It got to retain most of the managed money, and margins went up as existing managers took over from departing managers like me. The Lesson: Acquisitions can work out very well, but there is a ‘people’ cost. Cultures have to match, and entrepreneurs may not stick around long.

Peter Hodson, CFA, is Founder and Head of Research at 5i Research Inc., an independent investment research network helping do-it-yourself investors reach their investment goals. Peter is also Associate Portfolio Manager for the i2i Long/Short U.S. Equity Fund. (5i Research staff do not own Canadian stocks. i2i Long/Short Fund may own non-Canadian stocks mentioned).