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Vol. 31, No. 3
Plastics firms play chess in recession Stronger outfits emerge through acquisitions, while weak lose out By DAN SHINGLER dshingler@crain.com
INDIANS MAKE THEIR PITCH As the team employs its marketing muscle ahead of its April 12 home opener against Texas, it faces the dueling issues of a poor 2009 season and little optimism for 2010. Add in last summer’s trades of marketable faces Cliff Lee, a Cy Young winner, and Victor Martinez, an All-Star catcher, plus ownership’s reputation among fans for being thrifty, and there’s a host of issues with which to deal. “They’re hurt by the Browns and
Mergers and acquisitions are not the hot topic they once were, but in Northeast Ohio’s plastics industry, they’re a chief tool for companies to enter new markets, gain customers and expand capacity. The activity is resulting in stronger players taking out weak ones in an industry realignment that is driven by the recession, but which some observers say has been needed. “I want to stay “It’s a shakeout I think was in automotive, long overdue. We’ve had some but I want to weak suppliers and too many suppliers,” said Bill Ridenour, reduce my CEO of Polymer Transactions, dependency a mergers and acquisition firm on it.” in Newbury that finds both buyers and sellers for clients in – Joseph Gingo, the plastics industry. CEO, A. Schulman Mr. Ridenour and others say Inc. some companies are buying weakened competitors because they want the same customers they’ve been fighting to get for years. In other cases, they are buying into new geographies, such as Europe, or new industries, such as medical device manufacturing or aerospace. Or, they are diluting their dependence on troubled sectors such as automotive with acquisitions that diversify their customer bases.
See INDIANS Page 7
See PLASTICS Page 6
Ball club’s front office winds up marketing efforts to attract frustrated fans and overcome some bad PR By JOEL HAMMOND jmhammond@crain.com
F
ormer Boston Celtics coach Rick Pitino famously once said, in discussing the Celtics’ struggles, that “(Boston legend) Larry Bird’s not walking through that door, fans. Kevin McHale’s not walking through that door.” It’s a pantheon-worthy quotation, and one to which the Cleveland Indians definitely can relate.
Region’s angels in favor of pursuing new funds North Coast, Akron groups seek to capitalize on startups By CHUCK SODER csoder@crain.com
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Northeast Ohio’s only angel fund is about to deplete the cash it reserves for new investments, but the region could end up with two new funds to replace it.
The North Coast Angel Fund plans to finance three more early stage technology companies over the next three months, which would leave the group with no more money for new deals. Startups looking for capital shouldn’t fret, though. While the group of angels — a term for wealthy individual investors — has yet to decide if it will raise a second fund, managing member Clay Rankin said he would like the group to do so. They plan to make the decision over the next three months.
Plus, an informal network of angels in Akron, known as the ArchAngels, aims to raise its own formal fund over the next six months, according to Barry Rosenbaum, a senior fellow with the University of Akron Research Foundation, which oversees the Akron investors group. Loose networks such as the ArchAngels allow individual investors to get together regularly to view presentations by startups looking for capital and to collaborate
INSIDE For-profit colleges get booked up Institutions such as the University of Phoenix, Stautzenberger College and DeVry University are bolstering enrollment levels because of their flexible methods of delivering instruction. While some nonprofit colleges say they are not worried about losing market share, or students, to their for-profit counterparts, their attraction has prompted nonprofits to be more creative in attracting students. Read Shannon Mortland’s story on Page 3.
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CORRECTION
COMING NEXT WEEK
A Page One, Feb. 22 article on lead times in obtaining steel incorrectly identified the city in which Hawk Corp. president Chris DiSantis worked prior to coming to Cleveland. Mr. DiSantis worked at a steel company in Pittsburgh.
Spec homes scarcer
REGULAR FEATURES 30 Years and Counting ..9 Best of the Blogs .........19 Classified ....................18 Editorial ........................8 Going Places ...............12 List: Software Developers ................17 Personal View................8
Changes in financing are drying up the ability of local builders to build homes on speculation to enable quick sales to buyers, although national builders still offer them. The shift will change the new home buying and building process. We explore the issues the industry faces in our Real Estate section.
MARCH 8-14, 2010
CAN’T GET NO ... Most people aren’t especially happy in their jobs these days, and nowhere is the dissatisfaction more pronounced than among younger employees. That’s the result of a Conference Board survey of about 5,000 U.S. households that looked at job satisfaction by age group. In no age group did even half of respondents report they were satisfied with their jobs.
Age group Under 25
% satisfied with job 35.7%
25-34
47.2
35-44
43.4
45-54
46.8
55-64
45.6
65 and older
43.4
SOURCE: THE CONFERENCE BOARD; WWW.CONFERENCE-BOARD.ORG
700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 Phone: (216) 522-1383 Fax: (216) 694-4264 www.crainscleveland.com Publisher/editorial director: Brian D. Tucker (btucker@crain.com) Editor: Mark Dodosh (mdodosh@crain.com) Managing editor: Scott Suttell (ssuttell@crain.com) Sections editor: Amy Ann Stoessel (astoessel@crain.com) Senior reporter: Stan Bullard (sbullard@crain.com) Reporters: Shannon Mortland (smortland@crain.com) Jay MIller (jmiller@crain.com) Chuck Soder (csoder@crain.com) Dan Shingler (dshingler@crain.com) Arielle Kass (akass@crain.com) Designers/reporters: Joel Hammond (jmhammond@crain.com) Kathy Carr (kcarr@crain.com) Research editor: Deborah W. Hillyer (dhillyer@crain.com) Cartoonist/illustrator: Rich Williams Marketing/Events manager: Christian Hendricks (chendricks@crain.com) Marketing coordinator: Laura Franks (lfranks@crain.com) Advertising sales director: Mike Malley (mmalley@crain.com) Account executives: Adam Mandell (amandell@crain.com) Dirk Kruger (dkruger@crain.com) Nicole Mastrangelo (nmastrangelo@crain.com) Dawn Donegan (ddonegan@crain.com) Business development manager & classified advertising: Genny Donley (gdonley@crain.com) Office coordinator: Toni Coleman (tcoleman@crain.com) Production manager: Craig L. Mackey (cmackey@crain.com) Production assistant/video editor: Steven Bennett (sbennett@crain.com) Graphic designer: Kristen Wilson (klwilson@crain.com) Billing: Susan Jaranowski, 313-446-6024 (sjaranowski@crain.com) Credit: Todd Masura, 313-446-6097 (tmasura@crain.com) Circulation manager: Erin Miller (emiller@crain.com) Customer service manager: Brenda Johnson-Brantley (bjohnson-brantley@ crain.com) 1-888-909-9111
Crain Communications Inc. Keith E. Crain: Chairman Rance Crain: President Merrilee Crain: Secretary Mary Kay Crain: Treasurer William A. Morrow: Executive vice president/operations Brian D. Tucker: Vice president Robert C. Adams: Group vice president technology, circulation, manufacturing Paul Dalpiaz: Chief Information Officer Dave Kamis: Vice president/production & manufacturing Kathy Henry: Corporate circulation/audience development director G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Subscriptions: In Ohio: 1 year, $59; 2 years, $102. Outside of Ohio: 1 year, $102; 2 years, $180. Single copy, $1.50. Allow 4 weeks for change of address. Send all subscription correspondence to Circulation Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-888-909-9111 or FAX (313) 446-6777. Reprints: Call 1-800-290-5460 Ext. 136 Audit Bureau of Circulation
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Layoffs latest trouble at software firm CSC Receivership, bankruptcy and recent cutbacks illustrate woes, though boss now more confident By CHUCK SODER csoder@crain.com
One of Northeast Ohio’s biggest software companies has been getting smaller as a result of financial problems that drove the Strongsville firm to file for Chapter 11 bankruptcy protection in November. Computer Systems Co., which does business as CSC Group, two
weeks ago laid off an undisclosed number of employees in an effort to hold down costs while the company continues searching for capital to pay off several million dollars in debt, said CEO Bill Zimmerman. The provider of document management software and services has made several staff cuts since April 2008, when it voluntarily put itself under the protection of a court-
appointed receiver to stave Lansing office to 30 from off a lawsuit from one of its about 50 since June 2009, investors. after it already had made CSC Group now employs cuts at that location and roughly 100 people at its closed its office in Livonia. headquarters on Foltz The recession hurt both Parkway, which is down the company’s sales and from 108 as of Jan. 1 and its ability to find many 125 in June 2009, according Zimmerman investors willing to buy a to information from Mr. large portion or all of the Zimmerman and Crain’s list of the company, leaving CSC Group only region’s largest software compawith deals the company considered nies, published on page 17 of unacceptable, Mr. Zimmerman today’s issue. Cuts have been worse said. He noted how CSC Group’s at the company’s Michigan offices; debtors agreed with the company’s CSC Group has reduced staff at its decision to turn down an offer to
sell the company to a group of investors last summer because the prospective buyers seemed uninterested in rebuilding the company. “It appeared as though the people … were looking to flip us,” he said. Mr. Zimmerman, however, said that today he feels better about the company’s prospects than he did in 2009. The company despite its troubles has retained “the overwhelming bulk” of its customers, and the economy’s apparent improvement may help CSC Group See CSC Page 6
INSIGHT
The book is out on for-profit colleges: They’re gaining steam Ascension forces traditional schools to take stock By SHANNON MORTLAND smortland@crain.com
JASON MILLER
Corsa Performance Exhaust’s new exhaust system for Ford’s Taurus SHO adds 14 horsepower (to a 365-horsepower engine) and 12.5 foot-pounds of torque. Craig Kohrs (above), Corsa’s vice president of marketing and sales, hopes car buyers fond of muscle cars will pay for the added performance.
PUTTING ON A SHOW Berea manufacturer aims to reinvent muscle car glory days, seize Ford’s momentum with souped-up system for automaker’s new Taurus By DAN SHINGLER dshingler@crain.com
C
orsa Performance Exhaust in Berea wants to do more than ride Ford Motor Co.’s coattails to growth. It wants to get right up under the bumpers of the revved-up automaker’s new Taurus SHO model, which boasts a Cleveland-made EcoBoost engine that Corsa thinks will be a hit. “American muscle is really who we are,” said Craig Kohrs, head of marketing and sales for Corsa. Muscle? Taurus? Really? Those might be questions from someone who hasn’t driven a Ford lately, or at least hasn’t driven the new Taurus. Armed with a 3.5-liter, twinturbocharged EcoBoost, the new Taurus SHO puts out 365 horsepower See CORSA Page 9
“(Corsa is) definitely an up-and-comer. ... Now they’re branching out.” – Brian Prior, merchandiser, Summit Racing Equipment
They’re new, striving to be wellknown and continuing to gain a bigger piece of the student pie. They are for-profit colleges. The University of Phoenix, Stautzenberger College, DeVry University and Strayer University are just a few of these schools that have popped up in Northeast Ohio in recent years. Their flexible methods of delivering instruction — and an enormous amount of advertising spending — are enabling forprofit schools to build their enrollment levels with students who otherwise might have chosen the traditional, nonprofit colleges that have called Northeast Ohio home for decades. “They’re obviously taking a big chunk of the market away,” said
David A. Armstrong, vice president of enrollment and legal counsel at Notre Dame College in South Euclid. “They have made all colleges look at what they do and see if what we do, we can do better.” About 2.6 million students are enrolled in for-profit colleges, and that number is rising by an average of 9% annually, according to a Feb. 8 article in the Chronicle of Higher Education. Overall, about 19 million students enroll in degree-granting schools every fall, the article noted. Such figures have caused Notre Dame to take notice. Though enrollment is up in all categories at Notre Dame, Mr. Armstrong said the college still worries it’s losing market share to the forprofit schools. As a result, Notre Dame recently launched the Finn Center, which will oversee its See BOOK Page 10
THE WEEK IN QUOTES “It’s a shakeout I think was long overdue. We’ve had some weak suppliers and too many suppliers.” — Bill Ridenour, CEO of Polymer Transactions, a boutique mergers and acquisition firm in Newbury. Page One
“Research has shown that the No. 1 factor on whether people buy or renew tickets is hope. It’s been said the Red Sox actually winning the World Series (in 2004, after an 86-year drought) hurt them a little.” — Jim Kadlecek, chair of the department of human performance and sport business, Mount Union College. Page One
“This is the country that will allow you to do whatever you want.” — Stella Moga-Kennedy, founder, Le Chaperon Rouge child care centers. Page 13
“We got (market) penetration that might have taken years to acquire — with the stroke of a pen.” — Eric Winbigler, president, Advance Paint Technology Ltd. Page 13
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Stimulus to fuel Ohio’s e-health record push Providers seek better care by sharing information By CHUCK SODER csoder@crain.com
First, hospitals and doctors must adopt electronic medical records. Then, they have to share them. The $43 million in federal stimulus money that the Ohio Health Information Partnership was awarded last month should help the state start down the path to achieving those two goals, which the federal government set in 2004 in an effort to improve medical care and lower costs.
Two-thirds of the money — part of the $775 million in stimulus funds that the U.S. Department of Health and Human Services awarded to organizations nationwide on Feb. 12 — will go toward the creation of Regional Extension Centers that will help hospitals and doctors choose and install electronic records systems. The rest will help fund the creation of a Health Information Exchange that will allow health care providers statewide to share those records digitally, which would be particularly
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helpful in cases where patients end up in hospitals they don’t normally visit, said Amy Andres, board chairman of the Ohio Health Information Partnership. “If the person ends up in the ER, the ER would know what meds they’re on,” Ms. Andres said. The partnership has yet to decide which health organizations will serve as Regional Extension Centers, though Ms. Andres said she has been in close contact with Better Health Greater Cleveland, a regional coalition of health care providers. “The good news is that a collaborative already exists, so they don’t have to try to create one,” Ms. Andres said. The Ohio Health Information Partnership by June plans to pick a handful of electronic medical records companies from which hospitals and doctors receiving help through the partnership can choose. To be on the short list, vendors will need to offer a “dramatically discounted price” on their services, Ms. Andres said. From there, the extension centers will help health care providers pick a records system and implement it. The federal government is prompting hospitals and physicians to have such systems up and running by the end of 2011 by promising larger reimbursements from the Centers for Medicare and Medicaid Services. The bonuses will shrink over time and in 2015 turn into payment cuts. Among the federal requirements is that hospitals share records, which so far has been an elusive goal for many regions in the country, including Northeast Ohio. OneCommunity, a Clevelandbased group that provides ultra highspeed Internet access to government agencies and nonprofits, built support for a Northeast Ohio information exchange in 2007. However, the group couldn’t round up financing from its partners, which included most of the region’s biggest hospital systems, said Mark Ansboury, OneCommunity chief technology officer. The idea, which was projected to cost about $15 million over the first five years, was “ahead of its time,” Mr. Ansboury said. Though federal money should help the new effort get going, he cautioned that the $14.8 million set aside for the statewide information exchange won’t last long. The effort could get help from Better Health Greater Cleveland, which is applying for a federal grant that would provide about $20 million in stimulus money for a Northeast Ohio information exchange. Any local exchange would be coordinated with the statewide effort, which in turn would be designed to eventually connect to exchanges in other states. Dr. Randall Cebul, director of Better Health Greater Cleveland, said securing the additional money would be a “long shot” because 200 groups are applying for 15 grants. The overall effort, however, is important because broad, quick access to patient records could help providers improve quality and cut costs, both for individuals and for the business community. ■
Volume 31, Number 10 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of May and fifth week of May, the fourth week of June and first week of July, the third week of December and fourth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2010 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $1.50. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. (888)909-9111. REPRINT INFORMATION: 800-290-5460 Ext. 136
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Plastics: Market favors strategic buyers continued from PAGE 1
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“I continue to try to reduce my dependency on automotive,” said Joseph Gingo, CEO of Akron-based A. Schulman Inc., a supplier of plastic resins that has announced two acquisitions in the last four months. “Let me be clear: I want to stay in automotive, but I want to reduce my dependency on it,” Mr. Gingo said, noting how acquisitions will help him do just that. A lack of investment by private equity firms and other so-called “financial buyers,” who in better times relied on easy credit to make acquisitions, means a friendlier market for traditional strategic buyers. And distressed companies continue to be put on the market, creating further opportunities for buyers. In 2009, there were 315 significant acquisitions made in the plastics industry worldwide, according to P&M Corporate Finance LLC, a Michigan M&A firm that works in the sector. More than 15% of those deals, 49 in total, involved distressed companies. By comparison, only 17 deals, or 5.6% of the 301 transactions in 2008, involved distressed companies.
New day for Michael Day That trend can be seen in Northeast Ohio. For instance, Mr. Ridenour recently found a buyer for Michael Day Enterprises in Medina, a nylon producer with revenues of $45 million in 2009. The company declared Chapter 11 bankruptcy last November with the intention of selling itself after seeing its sales fall from about $60 million in 2008. The credit crunch and a drop in U.S. automotive production were too
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Gingo said. In December, A. Schulman agreed to pay $191 million to acquire ICO Inc., a Houston-based maker of “masterbatch” plastics that produces plastic resins used by molders around the country. The company had 2009 revenues of about $300 million. “There was very little overlapping capacity” between the two companies, Mr. Gingo said. A. Schulman’s $10 million purchase last week of McCann Color, a maker of color concentrates in North Canton, was driven by its desire to replace an existing plant in nearby Sharon Center with McCann’s 12-year-old facility. The move also allows A. Schulman to reduce its dependency on the U.S. auto market, Mr. Gingo said. Whereas A. Schulman’s Sharon Center plant relied on automotive for about onethird of its business, McCann did almost no automotive business, he said.
Good times for the savvy Mr. Gingo said he’s still looking for other deals to fill specific niches, such as the Latin America market or the engineered plastics market in the United States. He’ll likely find them, said Mr. Ridenour, who also does work for A. Schulman. With the economy still tough for many plastics companies, he expects more will come on the market. Mr. Ridenour suggests firms market themselves while they are still healthy if they know they are going to sell.“Buyers would prefer to buy a company that hasn’t deteriorated so much that it’s in bankruptcy,” he said. ■
CSC: Firm opts for Chap. 11 over receiver’s changes find the right investors, he said. The company, he added, is engaged in “detailed conversations” with several prospective buyers. “We feel much more confident,” he said.
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much for it, Mr. Ridenour said. “It’s a sign of the times that this company finds itself in this situation,” he said. “It was a growing company until it ran into this automotive buzzsaw at the end of 2008.” The buyer was an Italian company, Radici Plastics USA, part of the giant Radici Group of plastics companies with revenue of nearly $2 billion in 2009. Radici paid $5.7 million to buy Michael Day and also signed a fiveyear lease valued at $3.1 million with KeyBank, the lender that ended up owning the company’s plant and property. Radici had little presence in the U.S. auto market, but wanted one. “It was a smart move for them, because Michael Day was probably the largest compounder of nylon for the automotive market in the U.S.,” Mr. Ridenour said. Of course, he added: “You have to have some faith in the automotive market to make this kind of deal.” Other companies are entering markets such as specialty health care. That was the stated objective of PolyOne Corp. in Avon Lake, which at the end of 2009 announced it was paying $12 million for Connecticutbased New England Urethane Inc. New England Urethane makes engineered materials used by plastic molders to manufacture specialized health care products. PolyOne chief financial officer Robert Patterson said the deal represented an opportunity to expand in a target industry at an attractive price. In Akron, A. Schulman also has been on the acquisition trail, announcing a deal in December and another on March 1 — each done for wholly separate reasons, Mr.
The company would not have filed for Chapter 11 bankruptcy in November had its original courtappointed receiver, Robert Ranallo, not resigned last fall, Mr. Zimmerman said. The receiver appointed to take his place, Robert Angart, planned to make several changes to the company, so to avoid them CSC Group filed for Bankruptcy Court protection, Mr. Zimmerman said. No receiver currently is in possession of the company. “Basically we said, ‘If that is going to happen, we might as well be in charge instead of the receiver being in charge,’” he said. Neither Mr. Zimmerman nor Mr. Angart, a company turnaround
specialist with Hillyer Group LLC of Cleveland, would say whether Mr. Ranallo resigned by his choice. Mr. Ranallo, who is a partner at accounting firm Skoda Minotti and a founder of Ranallo & Aveni LLC, both in Mayfield Village, did not return phone messages left at his office last Thursday, March 4, and Friday, March 5. Mr. Angart said he was chosen by Huntington National Bank, CSC Group’s biggest creditor. The bankruptcy filing, made in U.S. Bankruptcy Court in Cleveland, said CSC Group has between $10 million and $50 million in debts, and it listed the value of its assets in the same range. The company owes money on $13 million in senior debt from Huntington, according to the original receivership filing, though Mr. Zimmerman said CSC Group has paid off “a good portion” of that debt. The company also owes money on both $2 million in subordinate debt it received from DCC Growth Fund of Washington, D.C., and $3 million in subordinate debt from
Smith Whiley & Co., the Hartford, Conn.-based institutional investment advisory firm that originally threatened to sue CSC Group in 2008. In addition, the company owes nearly $1.1 million to its 20 largest unsecured creditors. Included in that amount is $282,000 in taxes owed to the state of Ohio and $17,400 in taxes owed to Cuyahoga County. The committee representing unsecured creditors has been generally happy with the way the bankruptcy has proceeded so far and supports CSC Group’s efforts to find outside capital, said Ron Gold, the committee’s attorney. “We’ve had a good level of cooperation from the debtor and the counsel and their principals,” said Mr. Gold, an attorney with Frost Brown Todd LLC of Cincinnati. A lawyer representing DCC Growth Fund and Smith Whiley did not return phone messages left last Wednesday, March 3, and Friday, March 5, or an e-mail sent Wednesday, March 3. ■
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Indians: Sizemore still key marketing tool continued from PAGE 1
Cavs owners spending whatever they have to,” said Paul Roetzer, president of Cleveland-based PR 20/20, “and by fans proving they’ll support a winning baseball team in the ’90s. Until they spend, I don’t know that any amount of marketing will get more than 20,000 fans in the seats.” But the Indians do have hope, and they’re using it. There’s the Tampa Bay Rays and Colorado Rockies, two teams that recently have advanced to the World Series despite smaller payrolls and being given little chance to do so. And there’s the hiring of manager Manny Acta, who has proven he realizes the importance of connecting with fans through town hall meetings and media appearances. The engaging Acta replaced the often-stoic Eric Wedge. “Research has shown that the No. 1 factor on whether people buy or renew tickets is hope,” said Jim Kadlecek, the chair of the department of human performance and sport business at Mount Union College. “It’s been said the Red Sox actually winning the World Series (in 2004, after an 86-year drought) hurt them a little. Part of being a Cubs fan is the misery (they haven’t won a World Series since 1908) of being a Cubs fan.” The Indians continue to push unique pricing and promotions: For the second straight season, the Indians are employing value-based pricing, which assigns different prices to games at different points in the season. In addition, the team has added to its litany of discounts and
promotions, including a two-forTuesday offer, where fans get two bleacher seats and $20 in food vouchers for $32; and a Sunday package in which fans can purchase a package for as low as $52 that includes four game tickets and $40 in food or merchandise. Jim Kahler can relate to the struggles. Mr. Kahler, former vice president of sales and marketing for the Cleveland Cavaliers and now executive director of the center for sports administration at Ohio University, said hope is crucial to marketers. He cited the 1997 NBA Draft, when the Cavs selected Derek Anderson from Kentucky and Brevin Knight from Stanford, two names familiar to fans from the recent NCAA men’s basketball tournament. The year prior, the Cavs took a Ukrainian named Vitaly Potapenko and a Lithuanian named Zydrunas Ilgauskas. “We had a lot of buzz from Anderson and Knight,” Mr. Kahler said. “But with Potapenko and ‘Z,’ I thought, ‘I have to get the sales staff going out there, and I don’t even know how to say their names?’ Every team in every sport has to build on hope.”
The Grady’s still here In the absence of Messrs. Lee, Martinez and the old Travis Hafner, All-Star center fielder Grady Sizemore helps that hope. Mr. Sizemore missed 56 games and hit .248 in 2009, but by all accounts is fully healthy and still the face of the franchise. That’s the case despite an embar-
rassing November incident in which near-nude photos went viral on the Internet. Mr. Sizemore said he took the photos for his girlfriend, and they were stolen from her e-mail account. Mr. Sizemore adorned the front page of a four-page Indians ad section in the Feb. 28 Plain Dealer that pitched “Family-Friendly Entertainment at Family-Friendly Prices.” “Grady — one of the elite players in baseball — will continue to play a major role in how we market Cleveland Indians Baseball,” Indians vice president of public relations Bob DiBiasio said in an e-mail. Without other stars, Mr. Sizemore likely would have been the point man on Tribe advertising this year no matter what, barring an offseason catastrophe. And while Mr. Sizemore’s judgment lapse created a buzz on the Internet, it’s a mistake from which he — and the Indians — can recover, public relations professionals say. “I don’t know if I would have paired that headline with his picture right away,” Mr. Roetzer said. “But because of his stature and what he’s accomplished, he has to be their main image.” While the circumstances surrounding the Internet photos were not ideal, Mr. Sizemore may have unintentionally created a buzz around the team, said Dominic Litten, social media and interactive PR manager at Cleveland marketing and advertising company Point to Point. “He may have gotten more people talking about the team,” Mr. Litten said. “That’s never a bad thing.” ■
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PUBLISHER/EDITORIAL DIRECTOR:
Brian D. Tucker (btucker@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Ring it up
L
eave it to Ohio to continue to apply 20thcentury regulations to an industry that has moved well beyond the last century. Members of the Ohio House should recognize that the rules that governed traditional telephone companies when they held a stranglehold on the market are no longer valid and should move forward with updated regulations that would be in line with the competitive and changed nature of the telecommunications industry. The state Senate already has approved a piece of legislation, Senate Bill 162, that would modernize Ohio’s outdated telecom rules. However, the House has been dragging its feet on a parallel bill, House Bill 276, and is causing proposed reforms to languish unnecessarily. It’s hard to justify the hang-up. It isn’t as though traditional landline phone companies enjoy a monopoly over phone service any longer, at least in most parts of the state. Just look around. Cable companies aggressively have been pushing phone service and many people have opted for no home phone at all because of their cell phones. As a result, the number of landlines served by incumbent phone companies has plunged by nearly half over the last decade, to 4 million in 2008 from 7 million in 2001. Most of the Ohio regulations with which traditional phone companies must comply don’t apply to their cable and wireless rivals. So, why saddle a group of companies that is losing market share by the basketful with rules that don’t vex their competitors? It’s not that any one rule is particularly onerous. However, the regulations in total are a lot like the old union work rules that used to bedevil steelmakers at their mills. The hoops a company must jump through to avoid violating them can create an unwelcoming atmosphere for doing business — and Ohio surely doesn’t need to discourage telecom companies from investing in the state. After all, a company such as AT&T, which operates traditional phone companies in 22 states, can pick and choose where it makes its investments. It plans to spend at least $18 billion on hard wire and wireless capital investments this year. Passage of modern telecom regulations wouldn’t hurt Ohio’s chances for snagging its fair share of that money and more investment down the road, says Tom Pelto, president of AT&T Ohio. We might be skeptical of this legislation if there was strong opposition to it from either labor or business interests. However, the Communications Workers of America and the Ohio Chamber of Commerce both have voiced support for passage of the telecom bill. Indeed, the chamber’s vice president of government affairs, Lisa Woggon, wrote to House Speaker Armond Budish that the legislation “is so important to our state that the Ohio Chamber has designated the floor vote on the bills as a key vote that will be reflected in our legislative voting record.” Ms. Woggon’s letter was written in late January. It’s now March. The House needs to answer the call and to get the reform measure going so that Ohio telecom rules no longer are a throwback to a bygone era.
FROM THE PUBLISHER
Jackson rises to the occasion again
M
education has to happen at the county aybe it was the sunshine that level,” the mayor said to resounding apmade the day so pleasant; plause from the 700-plus in the audience. after all, we just had one of This mayor gets it, and he’s the right the most miserable Februarys person in that job at this point in CleveI can remember. But last week it looked land’s history. A not-too-distant predecesand felt, finally, like spring might come sor would not have been able to set aside before June this year. ego and work in concert with other mayors It was Frank Jackson’s State of the City or this new county council and speech, and he was upbeat executive. despite the daunting problems BRIAN He’s right in calling for a counthat he and every other big-city TUCKER tywide authority that could mayor face these days. examine innovative ways to fund To his credit, the mayor public education collaboratively, continued an open spirit and buy goods and services together attitude about collaborative and perhaps even consider joint problem solving among governhealth care packages that could ments. He knows that radical leverage the large numbers of transformation is about to happen public employees. in his county government and it The mayor said we need to appears he wants to be a partner. think about countywide magnet schools After all, the next census is likely to show on the model of those that are doing so another steep drop in his population, well in his city. He’d like to see a mechaincome tax receipts are in the toilet nism created to help public, private and with this horrendous economy and he’s parochial schools share scarce resources. pressed to do more with less at every turn. He also is excited — and he ought to be — “If we are going to have educational about his partnership with Cleveland State excellence, and become globally competiUniversity to develop a K-12 school to tive, then making systemic changes in
serve downtown residents and others. Mayor Jackson knows that schools chief Eugene Sanders’ plan to transform public education is critical to Cleveland’s future. He said, in his ever-so-forthright manner, that he knows young couples will abandon his city if we don’t get the schools fixed. And he said he doesn’t blame them. That’s what you get from this mayor. Straight from the heart, a man with candid and passionate hopes and aspirations for the city that is his home. I hope he succeeds in forging partnerships with our area colleges and universities to create stronger bonds between them and Cuyahoga County’s schools. We all are wedded to this place; we all have great stakes in its future. The political and education leaders who manage to solve this problem — or even improve it significantly — will earn a lofty place in history. I hope they find a way to succeed. Perhaps then, historians will look back one day and say that it was this time, not the public-financed building boom of the late 1900s, when the real renaissance of Cleveland and Cuyahoga County began. ■
PERSONAL VIEW
Public officials’ perks corrupt the system By THOMAS V. CHEMA
I
t is not exactly news that our legislative bodies, whether we are talking about the General Assembly in Columbus or the Congress in Washington, D.C., are not performing at the optimum. There are many reasons for this partisan gridlock, but as citizens, we all need to find solutions and find them quickly. I would like to suggest that one reason for our current mess is that we have increasingly “professionalized” the holding of public office. Since the early 1970s, changes to election laws, including campaign finance reforms and other efforts to instill ethics into our public officials, have had a series of unintended consequences.
Mr. Chema is president of Hiram College. Today, it is less and less likely that regular citizens will take time from their businesses, professions or the academy to serve in office. We have made it much too complicated, expensive and unattractive to be a true citizen legislator. Instead, in our attempts to rectify various abuses, particularly around funding, we have unintentionally created professional politicians who make holding office a 30-year career — culminating in a very generous payout from the Ohio Public Employees Retirement System or similar pension. Although our country was founded on the premise that ordinary citizens become involved in government, it is safe to wonder today who is serving
whom. In fact, today there are basically two paths to hold public office: One, you are rich to start with and therefore can afford to spend your own money seeking a position; or two, you start out in an elected office (usually at the local level) and move from one office to another. This has, in fact, stopped the revolving door, but it hardly has been beneficial. Moreover, after eight or 10 years in the system, there is an enormous incentive to keep running for office. That incentive is the public pension system, which is very hard to resist with its defined benefits and health care opportunities. To overcome this professionalization of public office, two decades ago we turned to another reform called “term limits.” This effort to regulate the length See VIEW Page 9
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Crain’s Cleveland Business is celebrating its 30th year as Northeast Ohio’s premier source for business news with a special double issue, which will feature profiles of 30 of the most influential Clevelanders. As part of the celebration, we also are reflecting on the most memorable events of the past three decades with weekly polls — some of which can be found in this space — trivia questions, online content and video interviews. You can get in on the fun by visiting CrainsCleveland .com/30thanniversary.
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I really like Trapper Jack. He’s pleasant.
Austin Carr on (FOX) Sports Ohio. He’s friendly and nice.
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Corsa: Diversification boosts company continued from PAGE 3
and generates 350 foot-pounds of torque — enough to embarrass many famous American muscle cars from the 1960s and ’70s. For instance, a 1971 Z-28 Camaro with a vaunted 350-cubic-inch engine generated only about 330 horsepower and was heavier than the modern Taurus. Many of those old Camaros, Firebirds, Corvettes, Chargers and Challengers ultimately produced more horsepower than their factories ever intended, because their owners beefed up their manifolds, carburetors, exhausts and other systems to make them more muscular. And that’s exactly what Mr. Kohrs and Corsa are counting on some Taurus SHO owners to do as well. The new exhaust system Corsa began offering for the Taurus in February adds 14 horsepower and 12.5 footpounds of torque to the car’s factory performance specs — and adds a sound that no factory car ever had, he said. That extra punch and panache will cost Taurus owners about $1,700 for the new Corsa exhaust system. That’s no small amount, even for a $38,000 automobile, but many car buffs are willing to pay such a price for performance, said Brian Prior, a merchandiser at Summit Racing Equipment in Tallmadge. Mr. Prior said Corsa’s exhausts are in the mid to high range in terms of aftermarket performance
exhausts, of which Summit carries several brands, including Corsa. “They’re definitely an up-andcomer,” Mr. Prior said. “Their core niche started in the Corvette and marine industries and they built quite a reputation out of that … but now they’re branching out.” Corsa, with about 60 employees, has been around since 1988, when it made only exhausts for boats. It began making Corvette exhausts in 1998 and last year was bought by the Mifsud Group in Wadsworth. Its new owner, for which Mr. Kohrs worked before the Corsa purchase, wants the company to offer more products for more models of cars, he said. The private company does not disclose its revenues. Though Dodge muscle cars and, more recently, trucks have represented successful new markets for Corsa, Mr. Kohrs said this latest exhaust might have extra potential because of Ford’s recent success as a brand and because of the popularity of the EcoBoost engine. “We’re committed to increasing our depth of Ford products,” Mr. Kohrs said. “Right now, from what we see, Ford is doing a better job than anyone else at delivering what the consumer wants.” The EcoBoost seems like a wise choice in terms of new engines to target. Ford spokeswoman Megan MacRae Whatman said in an e-mail
View: Rework officials’ benefits continued from PAGE 8
of time a citizen can serve in an elected office has undermined institutional memory and seeded enormous power to unelected staff and lobbyists. Term limits just have not worked in Ohio. In fact, the unintended consequence of this reform is that our state government is even less effective — a huge problem in these difficult economic times. How to deal with this issue? I suggest a three-tiered approach that gets back to our founders’ view of citizen legislators, who took time away from their careers to engage in public service, rather than making legislative service a career. First, abandon term limits, at least for legislators. Second, prohibit elected public officials from partici-
pating in the public pension systems. Third — and this will not be popular — pay elected public officials more reasonable salaries. These steps will not solve all the partisan bickering and liberal/conservative inability to compromise, but they will stop the constant moving from office to office and will discourage people from holding on to elective office because of their personal economic stake. And maybe it will encourage elected officials to truly represent all of the public, rather than the subgroups that help them get re-elected. In politics, as in all other human endeavors, the ends do not justify the means. Getting elected should be a means to serving the public interest, not the end — personal economic benefit. ■
Moderated by
that the company already has sold 6,000 vehicles with the new EcoBoost, which will be put in more Ford vehicles in the next few years. And there was another reason for designing an exhaust for the Taurus SHO — Mr. Kohrs hoped the EcoBoost engine also would be available in Ford’s new Mustang, which he expects to appeal more to the muscle-car crowd than the Taurus SHO. So far Ford has not linked the two, and Ms. Whatman said the 2011 Mustang will not be available with the EcoBoost. However, Ms. Whatman also said that by 2013, 90% of Ford’s vehicles will be available with the turbocharged powerplant. ■
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To the newly elected 2010 Officers and Board Members Mechanical Contractors' Association of Cleveland: President: Vice President: Treasurer: Past President & Chairman of the Board:
Stephen Comunale S.A. Comunale Co., Inc. Geoff Engel The Brewer-Garrett Co. Michael Brandt Smith and Oby Co. David Williams The Soehnlen Piping Co., Inc.
Board Members: Richard Bukovec, Diversified Piping & Mechanical, Inc.; Charles Caye, Smith and Oby Co.; Michael J Gallagher, The John F. Gallagher Co.; David Katz, E.B. Katz Inc.; Richard Mohar, E.B. Katz Inc.; James Primozic, Northeastern Refrigeration; Thomas Wanner, Executive Director.
The Mechanical Contractors' Association of Cleveland represents Union affiliated mechanical contractors who install and maintain heating, cooling, refrigeration, fire protection, and process piping systems in all types of buildings in northeast Ohio. The Association offers educational, labor relations, government affairs, safety, informational and promotional services to its members. MCA of Cleveland is affiliated with the Mechanical Contractors' of America (MCAA) in Rockville, Maryland, and works closely with its partners at Pipe Fitters Local 120.
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Book: Students like flexibility offered by for-profits Staffing firms continued from PAGE 3
adult, graduate and professional programs. Under the Finn Center, Notre Dame will increase assistance it provides to adult students in areas such as recruitment, financial aid and retention, Mr. Armstrong said. The adult programs also will be revamped to offer more convenience, partly by offering more online classes and majors, he said. Classes will be offered in person days, evenings and weekends. “Adults, when they’re learning, have different needs than traditional students,” Mr. Armstrong said. “When adults go to school, it’s all about convenience and cost.”
No nagging In the 2007-2008 school year, the cost to attend a private, nonprofit, four-year college averaged $33,935, according to “For-Profit Higher Education by the Numbers,” a study released in January by the National Consumer Law Center, a nonprofit group in Boston. By contrast, the average cost to attend a for-profit school was $22,950, and the cost to attend a public, four-year college was $17,497, according to the report. Though it’s cheaper to attend a
public, nonprofit college, for-profit schools still are attracting students, especially those unconcerned with a campus setting. Alecia Jones is one of the University of Phoenix’s 7,000 Northeast Ohio students. Though she received her undergraduate degree at Kent State University in 1997, she said the University of Phoenix was the right place to earn her MBA with a concentration in marketing. “I was really able to get the direction and guidance I needed and that relationship continued throughout my experience as a student,” she said. The flexibility of taking classes online and in person at three local campuses has worked well for Ms. Jones, 35, who will graduate in August and plans to open her own business development firm to provide fundraising services to nonprofits. Stautzenberger has operated in Northeast Ohio since 2005 and has 410 students enrolled at its Brecksville campus, said Donna Palmer, vice president and director of that campus. Only a handful of its classes are offered online, she said. About two-thirds of Stautzenberger’s students have transferred from other colleges in Northeast Ohio, mainly Cleveland State Uni-
versity, Kent State University, the University of Akron, and Cuyahoga and Lorain County community colleges, Ms. Palmer said. Transfer students have told her they prefer smaller class sizes and individual treatment. “They get academic advising on so many fronts, they probably think we’re beginning to be a nag,” Ms. Palmer said.
Sticking with tradition Though students are flocking to for-profit institutions in rising numbers, some nonprofit colleges in Northeast Ohio say they’re not worried about the competition. They say they pull students from different populations, largely those who want a traditional or residential college experience. Rob Spademan, associate vice president of marketing and undergraduate admissions at Cleveland State, said for-profits tend to target people who already have earned some college credits, while Cleveland State recruits students coming out of high school and working adults looking to earn a master’s degree. “I wouldn’t say we react to (the for-profit schools) at all,” Mr. Spademan said. “This is our home
market. We know where our kids are.” Traditional, nonprofit colleges also have had years to refine their missions and how they deliver programs, said Scott Evans, vice president of institutional advancement at Lake Erie College. “There may be some efficiencies (at for-profit schools), but it will take some time for for-profits to catch up to the delivery systems and methodologies that nonprofits have been offering for decades,” he said.
Partnership possibilities But don’t discount for-profit schools altogether, said Peter Ross, vice president of enrollment management at Tri-C. The community college often works with for-profit schools such as the University of Phoenix to help students transfer the credits they earned at Tri-C to put toward a bachelor’s degree, he said. Most Tri-C students who want to pursue a bachelor’s degree initially consider attending local nonprofit schools such as Cleveland State, Kent State, Akron and BaldwinWallace, but they also look at for-profit schools once they know more about them, Mr. Ross said. The flexibility in curriculum delivery that for-profits offer appeals to many adult students who work or have families, he said. For-profit schools also tend to offer programs that have a lot of job possibilities, which are often the same programs that nonprofits use to help support liberal arts programs that aren’t linked to specific careers, said Kevin Kinser, associate professor in the Department of Education Administration and Policy Studies at the University at Albany, State University of New York. He has studied the dynamics of for-profit colleges. For example, Stautzenberger entered the Northeast Ohio market with a veterinary technician major that also was offered at Tri-C, which had a three-year waiting list to get in, Ms. Palmer said. “We pretty much depleted their waiting list by at least a year,” she said. At the very least, for-profit colleges are forcing nonprofits to think outside the box to attract students, Tri-C’s Mr. Ross said. “In some sense, (for-profit schools) push us to be creative. They make us look at our curriculum and how it’s offered,” he said. ■
with different client bases combine forces Alliance, eSearch say joint venture bolsters job placement capabilities By ARIELLE KASS akass@crain.com
Two staffing firms are teaming up to create a more comprehensive source for job placement assistance. Alliance Staffing Solutions, a specialized staffing service with strengths in health care, manufacturing, clerical, information technology and engineering employment, is partnering with eSearch Inc., a company that specializes in financial services jobs. Randy Samsel, president of eSearch, said while the company does a good job of finding bookkeepers or accounting clerks, it lacked the expertise to fill other jobs — and so either did it poorly for clients or told them they were on their own to find hiring help. While the 35-person Alliance and 11-person eSearch will remain separate companies, they will refer clients from one to the other and are connecting their phone lines so calls can be easily transferred between both companies. “What we initially agreed to is a lot of sharing of information,” Mr. Samsel said. “We want to grow the businesses together.” Because 85% of Alliance’s work is for temporary jobs and a similar percentage of eSearch’s clients are looking for permanent employees, the companies said they thought the joint venture would be complementary to their clients. Windward Partners, a retained search group that does talent consulting for C-suite executives and is a part of eSearch, also is part of the agreement. Alliance also has a joint venture with background check company Crimcheck of Cleveland. Alliance president Aaron Grossman said he wants to continue searching for Cleveland-based partners. ■
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Plan to change law hiring rebuffed Critics say proposal limited well-run firms By ARIELLE KASS akass@crain.com
Jones Day’s hiring partner, in late January, penned an eight-page missive aimed at undercutting a National Association for Law Placement recommendation that law student recruiting be significantly altered in the coming years. It worked. On Feb. 26, the association’s board voted to reject its original proposal, which called for law firms to move their offer dates from the summer until January and proposed a twoweek offer window for students to decide what jobs they were going to take. Instead, the legal career planning and recruiting organization voted to shrink an existing 45-day offer window to 28 days and took no action on the offer date proposal. “During a public comment period our members participated in a spirited and thoughtful dialogue about the proposed recommendations,” the organization said in a statement. “After reviewing member feedback it became clear that there was no consensus among the membership about the nature and scale of change that might be appropriate. “As a result, the Commission did not submit its original proposal as a final recommendation,” the organization said. It was referring in the statement to the Commission on Recruiting in the Legal Profession, a sub-group that made the recommendation. James Leipold, the association’s executive director, said the offer date proposal — the part that rankled most law firms — is “off the table.” “I think it’s certainly done for now,” he said. “There was no consensus on the offer date.” Mr. Leipold said the association received more than 800 comments about the proposal, but that the Jones Day letter, which ignited discussion in legal circles, played a part in the decision not to move forward with the proposal. “That was certainly part of it,” he said. “We really weighed all the feedback.” Greg Shumaker, the firmwide hiring partner in Washington, D.C. who wrote the Jones Day letter, said he thought the decision to reject the proposal was “the right thing to do.” “We thought it was a thoughtful response to the concerns raised by a number of law firms, including ours,” he said. Mr. Shumaker said at no point had he been contacted by the association about the letter, which questioned the necessity and legality of the proposal and was posted on Jones Day’s web site and sent to the deans of several law schools. In the letter, Mr. Shumaker said the proposal did not serve the interests of well-managed law firms and put firms that had not been responsibly managed on the same footing as those, such as Jones Day, that had been. “I strongly feel we should not be handcuffed by this,” he said before the decision was made. “It takes a fairly short-term view of hiring. … I don’t think it’s in the student’s best interest.” Barbara Weinzierl, director of career planning at the University of Akron School of Law, said before the vote that she was not sure the proposal would have accomplished what it intended to do. Ms. Weinzierl
noted that law students would have added pressure on them if they had to wait through the fall semester of their second year to learn where they would be able to work as a summer associate, after interviewing in August. Still, she said the school would continue to work within whatever guidelines were established. “Our main goal is to see students succeed,” she said. “We’ll do whatever we have to do to make sure that happens.” Jennifer Blaga, director of career planning at Cleveland-Marshall College of Law at Cleveland State University, said any changes don’t affect her students greatly because they are accustomed to looking for
jobs outside of the typical period. Case Western Reserve University, which the other schools agreed would be most affected by any changes, would not comment on any potential changes. Ron Stepanovic, hiring partner at Baker Hostetler, said — as did others — that he saw no need to change the process, calling the association’s proposal a “bit of an overreaction” to the ills law firms suffered in the recession. “I don’t think the system is all that broken,” he said. However, Ryan Burns, director of legal recruiting and professional development for Benesch, Friedlander, Coplan & Aronoff, said he thought the process has needed “a good overhaul” for quite some time. ■
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GOING PLACES FINANCIAL SERVICE ANCORA ADVISORS LLC: Dana Lusardo to compliance associate.
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BOBER MARKEY FEDOROVICH: Karen J. Costantini to senior manager, taxation services.
STRATFORD COMMONS: Dana Williams to director of human resources.
BUCKINGHAM, DOOLITTLE & BURROUGHS LLP: Jon R. Stefanik II to associate.
DELOITTE: Craig Giffi to leader, U.S. automotive practice.
HOSPITALITY
GREAT LAKES RETIREMENT GROUP: Jarrett Lang to associate adviser.
GREAT WOLF RESORTS INC.: Chris Ballou to general manager, Great Wolf Lodge.
SCHNEIDER, SMELTZ, RANNEY & LAFOND PLL: Thomas I. Hausman to of counsel.
ARCHITECTURE ADA ARCHITECTS INC.: Jay E. Jesensky to business development manager.
UNIVERSITY SCHOOL: Kimberly Pleasant to director of marketing and
INSURANCE ALPHA PROPERTY & CASUALTY: Mark DeBlauw to divisional leader, automotive accounts.
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SCHLABIG & ASSOCIATES LTD.: Kelly Nizzer Bates to director of administration.
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ZINNER & CO. LLP: Tina Myers to tax manager.
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MIDDOUGH INC.: Richard J. Ragan to senior vice president and general manager.
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THOMPSON HINE: Robyn Minter Smyers to chair, diversity committee.
TUCKER ELLIS & WEST LLP: Jaclyn A. Bryk to associate. WELTMAN, WEINBERG & REIS CO. LPA: Tom McGuinness to director of title services.
MANUFACTURING PSC METALS INC.: David Spector to president, Northern region.
MARKETING LINEAR CREATIVE LLC: Sherry Thaler to diversity coordinator; Randy Jasinski to account executive, new business development; Hannah Levy to graphic designer.
NONPROFIT SUMMER ON THE CUYAHOGA: Bernadette M. Gosky to executive director.
REAL ESTATE KELLER WILLIAMS GREATER CLEVELAND WEST: Brian Salem, Matt Chase, Dave Sanson and Lindsay White to sales associates. RESOURCE TITLE: Andrew Rennell to chief operating officer.
SERVICE BRIGHTWOOD ANIMAL HOSPITAL: Kasie M. Podojil to associate veterinarian. FLEET RESPONSE: Allison Lanzilotta to vice president, business development.
TECHNOLOGY PARAGRID: Bob Bray to help desk engineer; Jerry Gobeille to delivery engineer; Stacy Devore to operations manager.
Your doctors. Your hospitals. Health Insurance for Your Business.
TELECOMMUNICATIONS TIME WARNER CABLE: Patrick Joy to vice president, finance and business operations.
TRANSPORTATION INTERNATIONAL TRANSPORT SERVICES: Jim Leopold to vice president, sales; Val Janicek to sales manager.
UTILITY
SummaCare’s network includes the doctors and hospitals your employees want to see. With SummaCare, your employees have access to more than 50 of the region’s finest hospitals, including the Cleveland Clinic Health System, University Hospitals and Summa Health System. Plus, our network includes nationwide coverage that follows your employees wherever they may reside or travel. To learn more about SummaCare, call your agent today or visit www.summacare.com.
FIRSTENERGY CORP.: Michael J. Dowling to vice president, external affairs; Gretchan E. Sekulich to director, communications.
AWARDS BALDWIN-WALLACE COLLEGE: Jan Murphy (Fairview Hospital, Lakewood Hospital) received the Dr. Edwin Riemenschneider Award for Excellence in Health Care Leadership from the Health Care MBA Class of 2009. KIDNEY FOUNDATION OF OHIO: Rick A. Chiricosta (Medical Mutual of Ohio) received the 2010 Person of the Year Award.
Send information for Going Places to dhillyer@crain.com.
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14 IRS EYES S CORPS’ WAGE REPORTING TACTICS.
13
SMALL BUSINESS
LIVING OUT THE AMERICAN DREAM
Immigration issues can be complicated, frustrating for many
V
eronica Dahlberg said immigration reform is one of the top priorities for immigrant business owners in Lake and Ashtabula counties. Ms. Dahlberg is executive director of HOLA, or Hispanas Organizadas de Lake y Ashtabula, which serves as the umbrella organization for the Latino Business Association of Northeast Ohio. The group hopes to send several busloads of people to Washington, D.C., to participate in the March 21 national mobilization for immigration reform. “It’s been horrible, and it hasn’t changed with this new administration,” said Ms. Dahlberg, who noted that the immigrant population provides both a consumer and labor base for foreign-born business owners. “Unfortunately, we’re seeing no action on this.” In practice for more than 30 years, Margaret Wong, an immigrant herself and the founder of Margaret W. Wong & Associates Co., helps those from other countries stay in the United States. At the age of 19, Ms. Wong and her sister left Hong Kong and came to the United States to study on scholarships. Ms. Wong describes practicing immigration as a “different world,” one that is peppered by the personal stories of her clients amid the complicated framework of immigration law and policy. “On a personal level, we all feel very sorry, but as a nation we don’t know what we want,” she said. — Amy Ann Stoessel
Some foreign-born entrepreneurs say being in U.S. helps open door to possibilities By AMY ANN STOESSEL astoessel@crain.com
S
tella Moga-Kennedy had to beg for a dime at the airport in 1979 when she landed in the United States from Romania with two suitcases and no money. Today, the founder of Northeast Ohio’s Le Chaperon Rouge child care centers is worth nearly $30 million. It’s the American dream: Work hard, prosper and be happy, and it’s a story that seems to ring especially true for those who come to the United States from other countries and start their own businesses. “I wake up every morning thanking God I’m in America,” said Mrs. MogaKennedy, who taught herself English by reading children’s books. “If you See IMMIGRANTS Page 16
In recession, some companies may buy their way out of growth rut By DAN SHINGLER dshingler@crain.com
Acquisitions can provide customers when finding them proves difficult
S
with discipline and focus. Just ask Eric Winbigler, president of Advance Paint Technology Ltd. in Cleveland. He’s done it — both the right way and the wrong way — including a deal he pulled off in 2008 in the teeth of the recession. “We got (market) penetration that might have taken years to acquire — with the stroke of a pen,” Mr. Winbigler said. Mr. Winbigler runs a 16,000-
mall businesses have struggled through the long economic downturn along with big banks, big automakers and other large corporations — but some have found ways to not only survive the crisis, but to grow through acquisitions. It can be a great strategy for essentially buying much-needed customers when few new ones are to be found, but it must be done
square-foot shop in Cleveland, where a dozen workers spend 90% of their time painting and coating parts that go into medical devices, aerospace components and other manufacturers’ products. Whatever time is left often is spent doing custom automotive work or other projects for individuals. He’s purchased two companies since buying Advance Paint in 2004: a metal-sawing company
where six employees cut large pieces of steel into manageable portions for manufacturers and steel service centers; and a threeman paint shop in Canton that offered many of the same services as Advance Paint, plus a few more. For companies in a position to buy, there’s less competition in the market than there was a couple of years ago, when financing was plentiful, said Bill Ridenour, CEO
of Polymer Transactions in Newbury. Mr. Ridenour specializes in helping plastics companies to buy other companies or to sell themselves. He said there are two kinds of companies buyers are likely to find in today’s market — those that have to sell because their banker or financial situation demands it, and those that will sell if they find the price they want. For the latter, Mr. Ridenour said buyers probably should expect to See BUYING Page 15
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SMALL BUSINESS IN BRIEF
GRANDOPENINGS
A resource for productive business
B. LUX BOUTIQUE
Euclid Avenue shop customizes work spaces Located on Euclid Avenue, across the street from the House of Blues, the new e4b (Environments 4 Business) Cleveland Resource Center specializes in work spaces, from complete interior construction to specific renovations or projects. Established in 2008, e4b creates environments for business that maximize productivity with interchangeable furnishings, style, color and texture that reflect image and culture and suit specialized needs. The company employs eight and also has a location in Akron. ■ TECHNICALLY SPEAKING: The Reserves Network has launched a new division, TRN Technical, that focuses on high-end consulting, contract and temporary assignments for technical, professional and managerial positions. “Contract staffing is becoming a popular staffing alternative for many businesses,” said Don Stallard, founder and CEO of The Reserves Network. The Reserves Network is a regional staffing service for the office, industrial, professional and technical markets; TRN Technical is based out of company’s headquarters in Fairview Park.
ters in Independence. Offices also have been opened in Detroit, Atlanta and Tampa.
First and Main shopping center 46 Park Lane Hudson 44236 www.bluxboutique.com
216-407-3070 hzoss@womfire.com twitter.com/womfire_hz
B. Lux is a boutique that specializes in apparel, accessories and shoes. Each piece is handpicked by owners Michelle Bryce and Lia Kalin, who are both natives of the Cleveland area. B. Lux carries brands such as Kensie, Glam, Miss Me and Hazel, with an emphasis on the romantic, yet fresh and chic. Phone 330-342-0033 Fax 330-342-0036 michelle@bluxboutique.com liakalin@bluxboutique.com
WOMFIRE 4401 Rockside Road, Suite 214 Independence 44131 www.womfire.com WOMfire, a new social media marketing company that helps brands and products capitalize on the millions of conversations already taking place online, has opened its main headquar-
FR
by
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human waste & why it matters
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CASLL LLC 4498 Great Smokey Circle Medina 44256 www.casll.com Founded by Scott A. Sarles, CASLL (Cleveland-Akron Senior Living Link) is a free elder care service available to seniors and their families covering eight counties throughout Northeast Ohio. CASLL was started out of the growing need for families to save time and energy while minimizing the stress of sorting through the several hundred options available for senior care and housing. CASLL matches the senior and his or her family with the ideal fit based on geographical and financial desires as well as clinical needs. CASLL provides person-centered guidance with Alzheimer’s and dementia care, assisted living, independent living and nursing homes. CASLL also will connect seniors with elder law attorneys, home health care and rehab services, hospice care, senior real estate professionals and home care companion services. CASLL’s services are free due to reimbursements through contracts with local senior service agencies and housing communities.
To submit a new business, send the following information by e-mail to Amy Ann Stoessel at astoessel@ crain.com: business name; address; city and ZIP; web site; brief description of business; business phone number; business fax number; business e-mail address; and date that business opened. Call 216-771-5155 with questions.
BIG
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Phone 440-623-5223 Fax 330-722-5011 scott@casll.com
We can’t take this sitting down.
IRS may watch more closely S corporations’ wage reporting tactics usiness owners operating under the S corporation structure should be aware that their tax returns and rulebooks have become fertile ground for authorities looking for new ideas on where to shore up compliance and raise new sources of revenue. The U.S. Government Accountability Office recently completed a study on how well S corps generally are complying with tax rules. The findings suggest S corps are under-reporting income and may be enjoying some tax advantages that Congress should reconsider. The S corp structure is a common choice of legal entity for owners of small businesses in large part because of the way it is taxed. The income of an S corp is not taxed at the corporate level, but is passed through to the tax returns of its individual shareholders. That means any earnings, losses and credits are reported by individual shareholders rather than the corporate structure, resulting in only a single level of taxation, at the individual level, rather than two levels of tax at both the corporate and individual level. It also means that whatever amount S corp owners are not paying themselves in salary is retained by the corporation as undistributed earnings, which means those earnings are not subject to payroll, Social Security or Medicare tax. This is a distinct difference for S corps compared to C corps or other types of partnership or sole-proprietor structures. The IRS has long held that S corp owners are expected to pay themselves reasonable salaries so that their income is fairly taxed, but it hasn’t been a point of rigorous enforcement by the IRS. There’s plenty of room for shareholders, their tax preparers and the IRS to
PETERDEMARCO
TAX TIPS judge what might constitute a reasonable salary. The GAO report said some S corps in 2003 and 2004 failed to pay adequate wages to shareholders for their service to the corporation, and it estimated the underpayment at $23.6 billion. That raises serious questions about whether employment taxes have been underpaid as a result, and whether perhaps the IRS might consider some new focus on this issue in its examinations and audits going forward. Other tax studies also have shown that inadequate shareholder compensation is a significant issue. The IRS has provided limited guidance on what often proves to be a highly subjective issue, prompting the GAO to suggest the IRS consider providing some new guidance to help improve compliance. The GAO also reported that about 68% of S corporation returns filed for the 2003 and 2004 tax years contained at least one misreported item, and 80% of those errors favored the taxpayer. The most frequent errors involved deducting expenses for which there was no legitimate eligibility. Also disturbing, the report says 71% of noncompliant tax returns were prepared by professional tax preparers. The GAO said preparer mistakes may result from a lack of standards for preparers to follow as well as a general misunderstanding of the tax rules, both of which could reasonably become the subject of future rulemaking or enforcement action to improve compliance. As economic circumstances prompt Congress to seek out new forms of revenue, none of this is good news for business owners operating under the S corp structure. The study’s discoveries combined with documented earlier concerns and the general economic and political climate may well cause the IRS and Congress to consider whether changes are in order. There are a number of moving parts to the debate in Washington over how Congress and various regulators should respond to current conditions with new tax rates, new rules and new reporting requirements. Owners in S corps should plan to stay tuned for what are certain to be some meaningful changes that may affect how they structure and operate their businesses going forward. ■ Mr. DeMarco is vice president and director of tax services for the regional accounting and business consulting firm of Meaden & Moore, headquartered in Cleveland.
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SMALL BUSINESS
Trusted insurance agent a must in starting company
C
leveland, and all of Ohio for that matter, is beginning to emerge from one of the most challenging economic downturns in recent history. The job losses, particularly in the automotive and manufacturing industries, have been felt across the state for years, and many Clevelanders remain unemployed despite their best efforts to find work. However, there has been some positive to come out of these layoffs — namely, a number of Main Street businesses have been started in and around Cleveland. Many of the men and women who lost jobs are chasing their passions or finding an unmet need in the area and are taking the opportunity to start their own businesses. These new entrepreneurs are forming the foundation of a new economy in the Midwest. Starting a new business is never easy, and statistics show that success often is hard to achieve. While this may be intimidating, there is one simple step that new and established business owners should take to help promote success and mitigate some of business ownership’s most expensive risks. When starting a new business, entrepreneurs often assemble a team of experts to help secure the vitality of the business. This group may include an accountant or bookkeeper, an attorney, a financial adviser, a banker and an insurance agent. While most small business owners generally will maintain an ongoing relationship with their accountant or banker, few maintain an ongoing dialogue with their insurance agent. This is a common mistake among new entrepreneurs and more seasoned business owners alike. Overlooking relationship maintenance is one of the biggest mistakes business owners make. As economic, environmental and social conditions change and as businesses grow, the value of the relationship between business owners and their insurance representative becomes clear. As new businesses get off the ground, owners will work with an insurance agent to purchase a Business Owners Policy, or BOP. While BOPs vary slightly from one insurance carrier to the next, in general they provide property and casualty insurance, crime insurance, liability insurance and vehicle coverage for rented or borrowed vehicles. A distinguishing feature of most BOPs is that they automatically include business income coverage, providing money to offset lost profits or to pay continuing expenses when a business is forced to shut down for a period of time. While establishing a BOP seems like a fairly obvious step in the
FRANKKUSHLER
ADVISER process of starting up a new venture, owners all too often sign their agreements and forget about them until the renewal process at the end of the year. This misstep can be detrimental to the business. Many Cleveland-based entrepreneurs are currently finding the opportunities available and are driving their nascent businesses forward by making smart investments. As ventures expand, it is critical that these business owners keep their insurance agents apprised of the evolving state of the company. For example, investments in equipment, technology, people, office space and vehicles all should be recorded in a BOP in real time, rather than added at the end of a business year. By updating their policy regularly, business owners minimize the risk of being underinsured in the event of a major loss. The same can be said about business owners who have not yet experienced a jumpstart in their businesses. Fewer employees or a downsized office should be noted on a policy as well, saving the owner a few extra dollars a month. While no business owners want to think it will happen to them, disasters such as winter storms, downed trees and fires, as well as incidents such as vandalism and theft occur regularly and significantly impact businesses in Cleveland and throughout the country. Incidents such as these can shut down a business for an extended period of time and produce major losses. If business owners neglect to take proactive measures to update their BOP prior to such a disaster or incident, they may be without the necessary coverage to protect themselves from serious losses. For new entrepreneurs and other new business owners, these losses can be life-threatening to the business — sometimes to the point that they are forced to shut their doors for good. Growth and expansion are goals of just about every small business owner. Strategic, forward-thinking small business owners take the time to make their insurance agents a regular part of their growth story. ■
Buying: Complementary services can lead to success continued from PAGE 13
pay roughly the same prices they paid in 2006 or 2007, even though the company’s revenues might be less than they were then. But, he said, there are many potential buyers whose own facilities are not running at full capacity — and by buying and consolidating a weaker competitor, they can more fully use the capacity and be more profitable. “Most of what we’re seeing are consolidating acquisitions to eliminate capacity,” Mr. Ridenour said. “They’re trying to buy customers, and if they have an existing facility, it’s probably underperforming because of the recession.” Often, the customers of two underperforming companies are enough to make one company healthy and profitable, he said.
Hindsight is 20/20 For Mr. Winbigler’s part, aside from retaining six good employees from the metal-sawing company, he wishes now that he’d skipped that deal. However, he’d love to find another painting and coating company like PowerMax, the shop he bought in Canton. Advance Paint and PowerMax formerly were competitors and knew each other well, Mr. Winbigler said, so when business fell off and PowerMax wanted to sell, it approached Advance Paint, knowing its customers would be valuable to the Cleveland company. That deal worked, Mr. Winbigler said, because it dovetailed so well with his existing business. PowerMax offered some specialized coatings that Advance Paint did
not work with and it had customers in Northeast Ohio that were not previously doing business with Mr. Winbigler’s company. “We added half a dozen new accounts,” he said. “Any one of them by themselves wasn’t anything huge, but together they were a nice piece of business.” It also worked, he said, because it was small. Advance Paint paid a six-figure price for PowerMax — an amount Mr. Winbigler was able to come up with from his own funds and by borrowing from a few family members. Had it been a multimilliondollar deal, he said, neither banks nor his relatives could have or would have funded it. But everyone’s been paid back already from the small transaction that took place, because it quickly paid for itself, he said. The metal-sawing company was a different experience altogether. Mr. Winbigler bought that company thinking he would diversify into another business. But he soon found out that the steel service centers that were using the company to handle their overflow work were quick to abandon it once their volumes declined and could be handled internally. “We had a 90% drop in business,” Mr. Winbigler said. “We closed the doors on that in 2008.”
The taste of success Others who have done deals during the recession say they’ve followed a similar recipe. AtNetPlus, a Stow information technology company with 21 employees, is one. Co-founder Jay Mellon said his company bought Akron-based
VirtuMark, another IT company, in October 2009 because it fit well with his existing business, would bring aboard talented employees that AtNetPlus needed and it also came with new customers. “We’d done this before and thought it was a very good way to add a group of customers to our portfolio,” Mr. Mellon said. “Most of the time when you hire an employee, they don’t come with customers.” Both companies offered networking and Internet services, Mr. Mellon said, but only AtNetPlus maintained its own servers to host client web sites, and it put them to work for VirtuMark’s existing customers. That meant not only more revenue, but customers now had a local person they could call, physically located with the server, when technical issues needed to be addressed. Now, Mr. Mellon said he’s also scouting for other similar acquisitions that can add customers and in-house capabilities. The same can be said for Advance Paint’s Mr. Winbigler, for whom the sweet taste of success has proven stronger than the bitter taste of a mistake. Mr. Winbigler said he’s hungry to do another deal and is actually working on one. But his future deals will be inline with his company’s existing core businesses, which he knows well, and will have synergies with his existing operations. Besides, he said, he likes buying companies in deals that work. “It’s been the most stressful, fun, joyous, wild ride I’ve been on in my 40 some years of living,” he said of his acquisitions. ■
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Mr. Kushler is regional vice president of the Great Lakes region for Travelers Insurance.
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Immigrants: U.S. offers level playing field continued from PAGE 13
really want to do something, you can do it.” While it’s not a new discussion, the issue of immigration is bubbling to the surface with the recession, globalization and debates over legislative reform serving as backdrops. Some are even pointing to immigrant entrepreneurs as the key to the country’s economic survival. Still others argue that those who are foreign-born are no more important than those who have been here all of their lives. Sens. John Kerry, D-Mass., and Richard Lugar, R-Ind., chairman of the Senate Foreign Relations Committee, late last month even introduced legislation that they claim will drive job creation and increase America’s global competitiveness by helping immigrant entrepreneurs who have secured significant U.S. investments get visas. Big-picture arguments aside, foreign-born entrepreneurs living in Northeast Ohio say the United States can be a place that opens up both doors and possibilities for the individual. “You see opportunities that don’t exist in another place,” said Radhika Reddy, who emigrated from India after studying at Case Western Reserve University and in 2001 founded Cleveland-based Ariel Ventures LLC, a business advisory firm. “In this country, there is still a lot of opportunity if you work hard.”
Land of opportunity Le Chaperon Rouge’s Mrs. MogaKennedy, for one, considers herself
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“America allowed me to be a driven person.” – Stella Moga-Kennedy (below) Romanian immigrant and founder, Le Chaperon Rouge child care differences or other factors. “For some, there is a bias against immigrants,” she said. “Some of the sentiment is that they are coming and taking away our jobs.”
Immigration economics
to be the American dream: “This is the country that will allow you to do whatever you want.” After a bad experience with her son’s child care, Mrs. Moga-Kennedy saved her money and opened her first day care in a church basement with $1,800 and toys she had collected from garage sales. Communism in Romania came “overnight like a tsunami,” she said. So when it became possible to come to the United States, Mrs. MogaKennedy was among those who applied for a passport — although it was another five years before she could leave her possessions behind and come to the United States with her husband and 9-year-old daughter. Today, there are eight Le Chaperon Rouge locations with another set to open in May in Solon. She recently published a book, “Stella’s Way,” and she was among those named in 2009 as winners of the Ernst & Young Entrepreneur of The Year award in Northeast Ohio. “America allowed me to be a driven person,” she said. Alper Behar, who in May 2004 moved with his wife to Cleveland from Istanbul in search of a higher standard of living, said in an e-mail the United States offers an even playing field for new businesses. Mr. Behar owns the Mentor and Richmond Heights locations of Any Lab Test Now, a walk-in laboratory. “One does not need to know important people to start a business and be successful,” wrote Mr. Behar, who owned a manufacturers representative sales and service organization in his native Turkey. However, Ariel Venture’s Ms. Reddy said there can be challenges — whether it’s due to cultural
Richard T. Herman, principal of Cleveland-based Richard T. Herman & Associates LLC, an immigration law firm, agrees there is a sentiment of “scarcity economics … if we bring outsiders in there’s going to be competition for scarce resources.” Mr. Herman is the co-author with journalist Robert L. Smith of the recently published book “Immigrant Inc.: Why Immigrant Entrepreneurs are Driving the New Economy (and how they will save the American worker).” “The new economy requires certain skill sets,” Mr. Herman said, including high-tech and advanced degrees, new capital and globalization. “We’ve got tremendous pockets of immigrant talent,” he said. Mr. Herman said he is encouraged by activity taking place in Northeast Ohio, including the launch of TiE Ohio, an organization that helps connect immigrant entrepreneurs and work being done by the Jewish Community Federation of Cleveland and Cleveland State University to pursue an international welcome center. “Of course we have to build up within, but part of building up within is attracting outside sources,” he said. Scott Shane, the A. Malachi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University’s Weatherhead School of Management, has a different take on whether immigrant entrepreneurs are in themselves a driving economic force. Dr. Shane said there is not a consistent statistical pattern that shows immigrants are more likely to be entrepreneurs. “There are plenty of people who immigrate to the United States and become entrepreneurs, but there are plenty of people who are born here who become entrepreneurs,” Dr. Shane said. Ultimately, Dr. Shane said it is important to consider the opportunity cost when applying resources. But, he said, “If someone is going to start a good company … it would do us a lot of good if they started it here.” ■
IN BRIEF A new way of thinking Video production company to try its hand at marketing
Sponsored by Additional Co-sponsors
Cleveland-based Think Media Studios, a video and event production company, has formed a marketing and communications firm, The Think Agency. “Our video clients were asking for agency recommendations to assist with their marketing plans. We were able to help some, but it was clear that the type of creative, fast turnaround support did not exist in the
market and we should expand our offerings,” said Brian Glazen, founder of Think Media Studios. “This void was a unique opportunity to combine forces and offer video production with marketing to create an online video strategy.” Mr. Glazen said so far three additional employees have been hired on top of the current 12 employees.
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LOCAL SOFTWARE DEVELOPERS RANKED BY FULL-TIME EMPLOYEES
Name Address Rank Phone/Web site
Number of full-time employees 1-1-2010
1-1-2009
Full-time programmers Industry specialization
Software products
Year Top local executive founded Title
1
Hyland Software Inc. 28500 Clemens Road, Westlake 44145 (440) 788-5000/www.hyland.com
765
742
117
Health care, higher education, government, financial services, insurance, manufacturing
OnBase, enterprise content management software suite
1991
A.J. Hyland president, CEO
2
Snap-on Business Solutions Inc. 4025 Kinross Lakes Parkway, Richfield 44286 (330) 659-1600/www.sbs.snapon.com
277
NA
75
Global electronic parts catalogs
Global EPC
1920
Tim Chambers president
3
Micros-Retail 30500 Bruce Industrial Pkwy., Cleveland 44139 (440) 498-4414/www.micros-retail.com
265
267
NA
Retail, including stores and direct commerce
Xstore Java POS, Store21 Specialty Retail POS, Tradewind Retail POS
1978
Jeremy Grunzweig vice president operations, Store Systems Group
4
MRI Software LLC(1) 20800 Harvard Road, Cleveland 44122 (800) 321-8770/www.mrisoftware.com
191
230
24
Business solutions for property management and corporate real estate
MRI Commercial, CRE Manager, MRI Residential, IMPACT, Access 24/7
1971
David M. Post president, CEO
5
TMW Systems Inc. 21111 Chagrin Blvd., Beachwood 44122 (216) 831-6606/www.tmwsystems.com
184
186
68
Trucking and logistics
TMWSuite, TL2000, TruckMate, Innovative, IDSC Netwise, IDSC ExpertFuel, TMT Fleet Maintenance
1983
David W. Wangler president, CEO
6
OEConnection 4205 Highlander Parkway, Richfield 44286 (330) 523-1800/www.oeconnection.com
147
167
27
Online parts and service exchange in the D2DLink, D2D Plus, D2D Express, automotive original equipment parts CollisionLink, LinkIQ, business ServiceAdvantage, RepairLink
2000
Charles Rotuno president, CEO
7
BrandMuscle Inc. 3750 Park East Drive, Beachwood 44122 (216) 464-4342/www.brandmuscle.com
121
91
15
Marketing solutions
2000
Philip Alexander CEO
8
The CSC Group 17999 Foltz Parkway, Strongsville 44149 (440) 546-4272/www.thecscgroup.com
108
130
17
Business health care, clinical health care, manufacturing, finance, insurance, PAPERS, nPower, R4 Acert, Phoenix government
1964
William F. Zimmerman chairman, CEO, interim CFO
9
SageQuest 31500 Bainbridge Road, Suite 1, Solon 44139 (888) 837-7243/www.sage-quest.com
99
99
NA
Provider of GPS fleet management solutions
Mobile Control
2003
Dennis Abrahams president, CEO
10
Virtual Hold Technology LLC 137 Heritage Woods Drive, Akron 44321 (800) 854-1815/www.virtualhold.com
80
80
20
Technology, software, telephony, virtual queuing
Virtual Hold Concierge, Rendezvous, WebConnect, Encore, Rapport, MobileConnect
1995
Kevin Sjodin CEO
11
Fit Technologies 1375 Euclid Ave., Suite 500, Cleveland 44115 (216) 583-0733/www.fittechnologies.com
70
125
10
Education (K-12 and higher education), nonprofits, health care, law firms, accounting firms
Student Information System (SIS)
1999
Micki Tubbs, CEO, cofounder; Michelle Tomallo, executive vice president, cofounder
12
Foundation Software 150 Pearl Road, Brunswick 44212 (330) 220-8383/www.foundationsoft.com
69
66
12
Accounting software for construction
Foundation for Windows
1985
Fred Ode chairman, CEO
13
Knotice 526 S. Main St., Suite 705, Akron 44311 (800) 801-4194/www.knotice.com
44
35
12
Direct digital marketing
Concentri
2003
Brian Deagan CEO
14
Main Sequence Technologies Inc. 4420 Sherwin Road, Hamilton Hall, Willoughby 44094 (440) 946-5214/www.pcrecruiter.com
42
42
NA
HR applicant tracking, recruiting, human capital management
PCRecruiter, PCRecruiter Resume Inhaler, PCRecruiter Interim, PCRecruiter Outlook Portal
1998
Martin H. Snyder, president William F. Kubicek IV vp marketing
15
Tribute Inc. 1696-F Georgetown Road, Hudson 44236 (330) 656-3006/www.tribute.com
38
38
7
Industrial distribution, fluid power, hose, seals, power transmission, automation, industrial controls
Tribute Software, TrulinX Software
1981
Timothy Reynolds president
16
Merge Healthcare 571 Boston Mills Road, Suite 500, Hudson 44236 (330) 655-3300/www.merge.com
37
30
18
Health care imaging and information technologies
Fusion RIS/PACS MX, Fusion RIS, Fusion PACS MX, Merge Mammo, Merge PET/CT, Fusion Billing
1987
Timothy Kulbago general manager
17
Imaging Science and Service Inc. 95 Executive Parkway, Suite 500, Hudson 44236 (330) 342-7760/www.issimage.com
35
35
5
Regulatory document compliance including sales and use tax exemptions, freight forwarding
TEAMS Express, LineLink
1994
Philip C. Hodge CEO
18
Data-Basics Inc. 9450 Midwest Ave., Cleveland 44125 (216) 663-5600/www.databasics.com
33
32
18
Service management and accounting
SAM Pro Enterprise, TechAnywhere 3.0, Escalation Manager
1974
Arthur K. Divell CEO
19
Noteworthy Medical Systems Inc. 6005D Landerhaven Drive, Mayfield Heights 44124 (440) 864-6800/www.noteworthymedical.com
30
60
NA
Health care technology
NetPracticePM, NetPracticeEHRweb, NetPracticeERX, NetPracticeMedicalHub
1996
Susan E. Hagerty CEO
19
PreEmptive Solutions LLC 767 Beta Drive, Suite A, Mayfield Village 44143 (440) 443-7200/www.preemptive.com
30
28
10
Software security, application analytics
Dotfuscator, DashO, Runtime Intelligence
1996
Gabriel Torok president
21
Associated Software Consultants Inc. 7251 Engle Road, Suite 400, Middleburg Heights 44130 (440) 826-1010/www.asconline.com
26
32
5
Mortgage lending software solutions for the primary and secondary mortgage markets
PowerLender Loan Origination & Processing System, PowerSeller Secondary Marketing System
1978
Timothy W. Liston president
22
Pointe Blank Solutions Ltd. 7055 Engle Road, Suite 304, Middleburg Heights 44130 (440) 243-5100/www.pointeblank.net
23
23
NA
Health care, government
CasePointe, PropertyPointe, LivingPointe, ProjectPointe, DocuPointe
2000
Thomas J. Coury chairman, chief software architect
23
Specialized Business Software 6325 Cochran Road, Unit 1, Solon 44139 (440) 542-9145/www.specializedbusinesssoftware.com
22
22
16
Financial services, government, technology
Docunym Document Imaging and Workflow
1999
Steve Wiser president
23
Urbancode Inc. 2044 Euclid Ave., Suite 600, Cleveland 44115 (216) 858-9000/www.urbancode.com
22
16
11
Technology
AnthillPro ALA
1996
Maciej Zawadzki CEO
25
ControlSoft Inc. 5387 Avion Park Drive, Highland Heights 44143 (440) 443-3900/www.controlsoftinc.com
21
21
NA
Process control
INTUNE, MANTRA
1985
Tien-Li Chia president
25
Workflow.com 20006 Detroit Road, Suite 300, Rocky River 44116 (440) 827-2000/www.workflow.com
21
38
11
Medical records software
Workflow EHR, Workflow PM
2002
Packy Hyland CEO
27
Bearware Inc. 7160 Chagrin Road, Suite 210, Chagrin Falls 44023 (440) 893-2327/www.bearwareinc.com
20
20
10
Logistics
Retail Distribution System, webTMS, Retail Payment System, Claims Management System
1987
Jeffrey Berichon president, founder
27
Metasystems Inc. 13700 State Road, Suite 1, North Royalton 44133 (440) 526-1454/www.metasystems.com
20
20
15
Software provider to discrete manufacturers
ICIM ERP
1975
Joseph R. Berish president
29
Datacore Consulting LLC 5755 Granger Road, Suite 777, Independence 44131 (800) 244-4241/www.datacoreonline.com
18
16
4
Distribution and manufacturing
CANDIS, CIS, CIS HelpDesk, AlertSystem, DCCRM
1998
Jim Conley senior partner
BrandBuilder, BrandPlanner, BrandWorkshop, BrandLibrary, Digital Asset Manager
Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Individual lists and The Book of Lists are available to purchase at www.crainscleveland.com. (1) Formerly Intuit Real Estate Solutions.
RESEARCHED BY Deborah W. Hillyer
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Invest: Third Frontier bolsters efforts For instance, late last month the group led a $2.5 million investment ABSMaterials Inc., a company in Wooster that makes a glass-like material meant to pull oil and other pollutants from air, water and soil. In addition to the fund’s $200,000, members and other individuals connected to the fund plopped down another $570,000, a record add-on investment for the group. Three other investors — local startup development group JumpStart Inc., strategic partner Fontz Drilling Inc. of Wooster and New York venture capital firm Harris & Harris Inc. — threw in $250,000 each, and the rest of the $2.5 million came from individuals not affiliated with the fund. ABSMaterials is using the money to expand research and development, production, marketing and sales. On March 1 it opened a twoperson Houston sales office to target the oil and gas industry, and soon it plans to lease another 11,000 square feet of lab space at Wooster’s Ohio
continued from PAGE 1
on investment opportunities. However, the region definitely benefits by a formal group such as North Coast Angel Fund, Mr. Rosenbaum said. Not only do formal funds by definition serve as a source of money for promising companies, but their tendency to do their own research encourages other investors to open their wallets. “The rigor of the processes that flow from having the fund, the formality and the due diligence — it’s very helpful,” Mr. Rosenbaum said.
Planting seeds The North Coast Angel Fund certainly has been opening its wallet of late. The group has invested in nine companies in nine months and will be 12-for-12 if it makes its next three on schedule. The fund itself typically invests $200,000 in each company. Members then chip in a few hundred thousand dollars of their own cash.
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Agricultural Research and Development Center, said CEO Stephen Spoonamore. The company’s Ohio office employs 14 in research, development and production, and that number only will grow, Mr. Spoonamore said. “We intend to stay in Northeast Ohio,” he said. ABSMaterials represents the kind of company the region needs and investors want to fund, said Todd Federman, executive director of North Coast Angel Fund. The company’s Osorb technology serves a need, and it appears to do so better than other products on the market, he said. “It really was a revolutionary concept. It wasn’t a moderate improvement,” he said.
low-up investments in existing portfolio companies, Mr. Federman said. Managing member Mr. Rankin said the group could continue meeting regularly to collaborate on individual investments and watch presentations by entrepreneurs. That, however, is the “fall-back” option. He’d rather raise more capital, which he said helps ensure high-potential companies stay in Northeast Ohio. The fund is subsidized partially by the state: The group has received two grants totaling $2.8 million from the Ohio Third Frontier project, a 10-year technology-based economic development program. The fund likely would not have formed without money from the Third Frontier, according to Mr. Rankin, who said the state program will have “a huge potential impact” on Ohio as the technologies it helped create are commercialized. As for the ArchAngels, the group plans to form its first formal fund without a Third Frontier grant, but it intends to apply for money next year, Mr. Rosenbaum said. The ArchAngels’ fund likely would focus on investments in the biomed-
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The existence of formal angel funds in Northeast Ohio helps high-tech companies in the short term, but in the long term it helps wealthy people in the region become more comfortable with angel investing, said Chris Coburn, executive director of Cleveland Clinic Innovations, the technology commercialization arm of the Cleveland Clinic. And that comfort level means more capital for future startups, he said. “It raises the level of sophistication,” Mr. Coburn said. There are about 300 angel groups in the United States, but only 22% have formal funds, said Marianne Hudson, executive director of the Angel Capital Association in Overland Park, Kan. Most angel investing is done by investors not affiliated with a group, she said. ■
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THEINSIDER
THEWEEK
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
MARCH 1 - 7
A loan program worthy of note
The big story: Benesch Friedlander Coplan & Aronoff merged with an Indianapolis law firm, and its dealmaking may not end there. The combination with the 43-person Dann Pecar Newman & Kleiman took place March 1. Ira Kaplan, Benesch’s managing partner, will remain in that role and the firm’s headquarters will stay in Cleveland. In Indianapolis, the firm will be known as Benesch/Dann Pecar for at least a year. Mr. Kaplan also said Benesch will “be pretty aggressive” when it comes to looking at other cities it may be able to enter. He mentioned Chicago, Milwaukee, Minneapolis and Philadelphia as possibilities.
■ Starving artists who need cash for a new clarinet, clay or canvases can stop digging through their couch cushions — there’s a new loan source in town. The NoteWorthy Federal Credit Union in Cleveland, which for 50 years has been making loans to musicians, is introducing a loan designed for creative types in any medium. The Creative Artist Project loan will be available for individual artists who are affiliated with a professional artistic organization, but who need more money to complete a project. In a pilot program, credit union president Henry Peyrebrune — who is also a bassist in the Cleveland Orchestra — said loans were made to help a band finish producing a CD, to provide working capital for a documentary film and to buy an embroidery machine for a costume designer. The 400-member credit union has about $1.5 million in assets and is earmarking $400,000 to make the loans, which will be for $50,000 or less each. Mr. Peyrebrune said the credit union is interested in expanding its base from musicians to other artists and in the future would like to be a resource for small nonprofits and arts businesses. “In our experience, artists are highly motivated and self-disciplined people, and
Seeing the light: The Public Utilities Commission of Ohio voted to require FirstEnergy Corp. to restore the rate discounts for the utility’s customers living in all-electric homes. And in an indication of how strongly the FirstEnergy move has bothered Columbus, State Sens. Tom Patton, R-Strongsville, and Tim Grendell, R-Chesterland, also introduced Senate Bill 236, legislation that would restore the discounts. FirstEnergy last year eliminated special rates that it previously promoted, leading to big increases in electric bills this winter for customers that heat with electricity. Heart healthy: Early stage company Cleveland HeartLab LLC, a specialty clinical laboratory that is developing proprietary diagnostic tests for measuring a patient’s risk for heart disease, said it completed a $3 million fundraising round and has selected its top officers. Cleveland HeartLab said its new shareholders include local business leaders that it did not identify, as well as private equity firms Glengary LLC, Second Generation Ltd. and Zapis Capital Group LLC. The company also announced that its board of directors elected Les Vinney as chairman, Jake Orville as president and CEO, Dr. Marc Penn as chief medical officer and Dr. Stanley Hazen as chief scientific officer. Mr. Vinney is the retired president and CEO of Steris Corp.
Speeding things up: OneCommunity received $18.7 million in stimulus money that it plans to use to help poor residents in Ohio and four other states get high-speed Internet access and learn to use it. The Cleveland-based nonprofit, which provides fiber-optic Internet service to government agencies and nonprofits in Northeast Ohio, will use $11.7 million of that money to increase broadband adoption in Cleveland, Akron and southeastern Ohio. The rest of the money for the “Connect Your Community” program will go to Detroit; Lexington, Ky.; Bradenton, Fla.; and Gulfport and Biloxi, Miss. The color of money: A. Schulman Inc. announced its second acquisition deal in the last four months, a move that will result in the closing of its Polybatch Color Center in Sharon Center. The Akron-based supplier of plastic resins bought McCann Color Inc., a producer of specially formulated color concentrates in North Canton. A. Schulman put the purchase price at “less than $10 million in cash.” A. Schulman will consolidate its production at the McCann plant. This and that: Snack foods maker Shearer’s Foods Inc. in Brewster agreed to buy Snack Alliance Inc., a producer of branded and privatelabel snack foods that is a supplier to retail giant Walmart. Terms of the transaction were not disclosed. … Hyland Software Inc. of Westlake acquired another document management software company, the 30-employee eWebHealth of Reading, Mass. Terms were not disclosed.
WHAT’S NEW
they’re a good credit risk,” he said. “They need capital just like any other business to keep the business going.” For more information on the loans, see http://noteworthyfcu.com. — Arielle Kass
Software guy’s soft sell yields new 20/30 web site ■ The Cleveland Professional 20/30 Club couldn’t find the software it needed to build the perfect web site. So it gathered 60 volunteers and built it. From March 5 through March 7, the local young professionals group hosted Advance 20/30, an event that doubled as a marathon programming session and a social outing. Attendees included programmers and graphic designers as well as volunteers from nontechnical professions. Dan Young, 20/30 Club president, denied that he was trying to pull a Tom Sawyer-style prank on members of the club, but from what I can tell it did indeed look like organizers were trying to trick attendees into believing that work can be fun. The event took place inside the old Hornblowers boat on Lake Erie, which now is home to software developer LeanDog, and it featured free food, beer and coffees as well as appearances by a balloon clown and a disc jockey. If that was Mr. Young’s ploy, it worked: The group got its new web site, though it
These killer organisms aren’t from a horror flick
It’s a jungle out there, and few companies know that better than ACRT. ACRT is an employee-owned “utility vegetation management” consulting firm. (Not your typical description of a consultant, to be sure.) The company offers national line clearance, tree care and urban forestry training, and its reason for being is to help power companies provide safe and reliable electric service. The company opened Feb. 11, 1985, with fewer than 50 employees. It now has more than 400 employees, works in most U.S. states, and has satellite groups in Lodi, Calif., Nashville, Tenn., Texas and Florida. ACRT also manages arborist training in six Job Corps centers in Oregon, Illinois, Vermont, Arkansas and Kentucky. ACRT moved to its current location, 1333 Home Ave., in 2004. For information, visit www.acrtinc.com. Send information about corporate anniversaries to managing editor Scott Suttell at ssuttell@crain.com.
Sounds like a job for Post-It notes ■ Nonprofits often have no problem touting how they help the public, but making that story stick in people’s minds is another thing. The Saint Luke’s Foundation hopes to help nonprofits better tell their stories through a new grant program called Make it Stick. Nonprofits that focus on health and health care, human services or neighborhood empowerment can submit proposals to receive grants for unique approaches to communications. “This is an opportunity to really look at nonprofits and how they can tell their story, build capacity, build programs and generate revenue,” said Kimberly St. JohnStevenson, communications officer for the foundation. Letters of inquiry must be submitted to the foundation by April 1. Saint Luke’s will decide which nonprofits to support and will fund their communications efforts for one year starting on July 1. More information is available at www.saintlukesfoundation.org. — Shannon Mortland
BEST OF THE BLOGS Excerpts from blog entries on CrainsCleveland.com.
COMPANY: ACRT Inc., Akron THE OCCASION: Its 25th anniversary
won’t launch until finishing touches are completed in May. Not only that, but Advance 20/30 also helped form more bonds between Cleveland’s community of software developers, said Mr. Young, who also is founder of DXY Solutions LLC, a Cleveland company that develops software for mobile phones. “It was an amazing weekend,” he said. — Chuck Soder
■ An infectious disease specialist from Cleveland was quoted in a scary New York Times piece on the rising threat of infections unfazed by antibiotics. The piece led with the tale of a former baseball player who died after being infected by an organism called Acinetobacter baumannii. “The germ is one of a category of bacteria that by some estimates are already killing tens of thousands of hospital patients each year,” The Times reported. While the organisms do not receive as much attention as the one known as MRSA — for methicillin-resistant Staphylococcus aureus — some infectious-disease specialists say they could emerge as a bigger threat. “In many respects it’s far worse than MRSA,” said Dr. Louis B. Rice, an infectious disease specialist at the Louis Stokes Cleveland V.A. Medical Center and at Case Western Reserve University. “There are strains out there, and they are becoming more and more common, that are resistant to virtually every antibiotic we have.” The newspaper said there are several drugs that can treat MRSA. But for a combination of business reasons and scientific challenges, the pharmaceuticals industry “is pursuing very few drugs for Acinetobacter and other organisms of its type, known as Gram-negative bacteria. Meanwhile, the germs are evolving and becoming ever more immune to existing antibiotics.”
Under water on the mortgage? Walk this way ■ Worried about the consequences of walking
away from your underwater mortgage? The ramifications might not be as bad as you think, according to a Wall Street Journal column that quoted Cleveland bankruptcy attorney Richard Nemeth. In his ROI column on the paper’s web site, Brett Arends wrote that people who are deeply under water on their mortgage “need to stop living in a dream world and give serious thought to walking away from the debt. No, you shouldn’t feel bad about it, and you shouldn’t feel guilty. The lenders would do the same to you — in a heartbeat.” In “non-recourse” states, the mortgage lender “may have no right to come after you for any shortfall. They may have no option but to take the home, sell it and eat the loss,” he wrote. Even in “recourse” states, lenders “may have limited ability to come after you. Often they’d have to jump a lot of legal hurdles, and it’s just not worth it for them,” Mr. Arends wrote. “They’re swamped with cases anyway.” As Mr. Nemeth told Mr. Arends, “In my experience, right now they’re not really going after anyone. They just don’t have the resources.”
Melt’s a handful, but our money’s on Adam ■ This was inevitable. Melt Bar and Grilled in Lakewood said on its Facebook page that Adam Richman and the crew of “Man v. Food” visited recently to film a segment for a coming show, which airs on the Travel Channel. Mr. Richman’s challenge was to eat a “monster grilled cheese” loaded with 14 different cheeses and that weighed in at close to four pounds. Based on the gigantic food Mr. Richman has eaten on this show, we’re sure he can handle it.
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