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Back on the radar

With the announcement of the United hub’s pending demise, Cleveland’s airport attracts the interest of rivals By JAY MILLER

I 06

t took a few years for the shoe to drop from the 2010 merger of United Airlines and Continental Airlines. And even though that shoe landed hard on Cleveland when United announced Feb. 1 it would drop its hub operations here, its thud could be the sound that encourages other air

EDITORIAL: It’s not the loss of a hub, it’s the exodus of jobs; Publisher John Campanelli has a distaste for United’s service. Page 8 carriers to increase flights in and out of the city. Ever since the two air carriers combined, most industry observers outside Cleveland believed the hub United inherited from Continental at Cleveland Hopkins International

Airport eventually would be gone. Airport system director Ricky Smith came close to acknowledging as much last week, when he said he and his air service development staff already are holding more serious conversations with carriers that, until now, were telling the Cleveland team they were postponing any decisions until the hub status changed. See UNITED Page 18



74470 83781



TIME FOR MACTION The combination of a cool hashtag on Twitter and midweek football games on ESPN have been good for the Mid-American Conference ■ Page 3

Entire contents © 2014 by Crain Communications Inc. Vol. 35, No. 6





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University Hospitals continues to hammer away at its $1.5 billion fundraising campaign — one of the largest in the country by an academic medical center — as it brought in $118 million in support in 2013. Last year’s haul puts UH, the region’s second-largest health system, ahead of schedule in reaching its $1.5 billion goal by 2016, which marks the health system’s 150-year anniversary. At the end of 2013, UH’s campaign had secured $1.124 billion. The health system publicly launched the $1 billion fundraising campaign in 2010 but expanded it by $500 million in late 2012. Last year marked University Hospitals’ largest showing in its history of gifts totaling $1 million or more with 28. It also received the secondlargest number of gifts of $100,000 or more with 111. “I think 2013 showed that there is enormous loyalty to UH,� said Sherri Bishop, UH’s chief development officer. “The volume of gifts in the six- and seven-figure range was tremendous, which means there is a lot of desire to support UH significantly. It’s not just a few $10 millionplus donors or small donors that give through our events. The entire

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A look at University Hospitals’ $1.5 fundraising campaign: ■Total raised: $1.124 billion ■ Total raised in 2013: $118 million ■ Gifts of $1 million or more in 2013: x-28 ■ Gifts of $100,000 or more in 2013: y-111 ■ Source: University Hospitals ■ x-Largest number in campaign’s history; y-Second-largest total in history of campaign range of givers surfaced last year.� UH’s 2013 fundraising total was below its 2012 total of $159.6 million, which included the largest gift in UH’s history, a $50 million donation from the Harrington family to launch a major drug development initiative. UH’s ambitious campaign is one of the largest fundraising efforts in the country related to health care. Massachusetts General in Boston launched a $1.5 billion fundraising effort in 2010. Also, the University of Southern California in 2011 launched a $6 billion fundraising effort, about $1.5 billion of which will support its medical school and hospitals. Bishop said the fundraising envi-

Tri-C program is building steam Community college begins a ‘long-term commitment’ to training for construction By JAY MILLER

Kent State University, Kent State and KSU are registered trademarks and may not be used without permission. Kent State University, an equal opportunity, afďŹ rmative action employer, is committed to attaining excellence through the recruitment and retention of a diverse workforce. 14-0038


ronment continues to improve along with the economy. She noted that people continue to support UH despite the throng of other fundraising efforts occurring in town. For instance, the Cleveland Museum of Art, the Cleveland Museum of Natural History, Case Western Reserve University, Cleveland Clinic and others remain formidable fundraisers. “With the economy starting to improve and more of Northeast Ohio’s nonprofits becoming more sophisticated in their fundraising, it does create a more competitive environment for philanthropic support, but it doesn’t change what we do every day and how we do it,â€? she said. “We still seek to engage those individuals, corporations and foundation who might have an interest in UH.â€? Nationwide, the health care fundraising landscape continues to approve, according to Bill McGinley, president of the Association for Healthcare Philanthropy. While 2013’s numbers aren’t yet available, giving remained steady from 2001 to 2012, at about $8.9 billion, although that’s still an increase of about 7% over 2010’s numbers. Once calculated, McGinley expects 2013’s number to have inched up slightly. “The people who have weathered through the economy, held on to staff and made more calls came back in 2011 and 2012,â€? McGinley said. “They were sitting much better.â€? â–

Businesses and governments in Northeast Ohio are making a serious commitment to build employment and business opportunities for minorities in the building trades. But those efforts can’t succeed without a supply of qualified newcomers to the various trades — plumbing, electrical and carpentry among them. That’s where Cuyahoga Community College’s new construction pre-apprenticeship program comes in. Last month, 14 minority students entered Tri-C’s eight-week, fourdays-a-week program that will prepare them to be hired as apprentices by construction contractors in the region. “This is the beginning of a longterm commitment,� said Robert Verhoff, director of construction industry training at Tri-C. “Once you get into an apprenticeship, you’re working� at a job that pays between $14 and $17 an hour with benefits, he said. Tri-C is using a multi-craft core curriculum developed by the building and construction trades depart-

ment of the AFL-CIO, which bills its national pre-apprenticeship program as the first that prepares students for the spectrum of construction trades. The program offers training in blueprint reading, mathematics for construction applications and hands-on instruction in the basic tools of the trades. The program is supported by commitments to hire from potential employers. The program is happening because it dovetails with efforts to push Northeast Ohio property developers and contractors to improve opportunities for minorities in the local construction sectors. Cleveland Mayor Frank Jackson has been leading that effort. The effort has won acceptance by several local businesses and institutions with plans for new construction, and they have signed an agreement to use what are called community benefits agreements that would bind them, and the contractors they hire, to hiring goals for minorities. Among the signees of that agreement are Cleveland Clinic, builder Geis Cos., the Northeast Ohio Regional Sewer District and University Hospitals. Pre-apprenticeship programs

Volume 35, Number 6 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of December and fifth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright Š 2014 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. REPRINT INFORMATION: 800-290-5460 Ext. 136

have struggled in the past. Graduation from this kind of early training program gives employers confidence that new hires can complete a three- to five-year apprenticeship. But in the past, students have been discouraged because of a lack of commitment from employers. A similar, union-sponsored program that started in 2003 couldn’t gain traction attracting minority candidates. But Dave Wondolowski, executive secretary of the Cleveland Building and Construction Trades Council, said he believes this program will do better. “We expect see a lot of success out of that program,â€? he said. “We really feel that the program is set up for success.â€? That success will come from the commitment of employers to follow through on bringing minorities into the trades. “The expectation is that Tri-C’s graduates will land jobs,â€? said Brian Hall, executive director of the Commission on Economic Inclusion, an affiliate of the Greater Cleveland Partnership that is leading the community benefits effort. “Our commitment is to make sure everyone has a job,â€? said Hall, who also is CEO of Innogistics LLC, a Cleveland-based logistics firm. “Some will make it directly into the trades, (and) some will make it into private industry. But we are all working to see to it they have jobs.â€? â–

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Metro moves on from healthy 2013 Health system exceeded profit target last year, now sets its sights on campus facelift By TIMOTHY MAGAW

MetroHealth’s staff hunkered down after a disappointing start to 2013, but with some intense financial discipline and a healthy dose of optimism from its new CEO, the taxpayer-supported health system in Cuyahoga County finished the

year in the black. And with its finances on stable ground, MetroHealth CEO Dr. Akram Boutros said the health system is gearing up for an eventful 2014, which could include the unveiling of preliminary designs for a dramatic facelift to its main campus, the groundbreaking for a new health center in Brecksville, and a

INSIDE: University Hospitals keeps hammering away at fundraising goal of $1.5 billion. Page 4 round of hiring. “We’re looking at our progress from the eyes of the taxpayer,” Boutros said. “They’ll ask, ‘Why should I continue to support Metro?’ I think today we’ve demonstrated our commitment to provide exceptional services.” Boutros inherited an enterprise that finished the first quarter of 2013 about $6.5 million in the hole.

But the man who became CEO last June 1 steered MetroHealth to a robust profit, at least by health care industry standards, of Boutros $18.6 million for 2013 — a total that surpassed its $15 million goal. That profit represents a 2.2% operating margin on about $844 million in revenue. In 2012, the health system posted a

$10 million profit on $773 million in revenue. “I think we had a good year,” said Tom McDonald, who chairs MetroHealth’s board of trustees. “But if you look at where we started, I’d say we had a pretty exceptional year.” The health system’s pivot happened without any layoffs, which have occurred at other health systems in the region. Boutros said MetroHealth added 196 full-timeequivalent employees and plans to add another 150 this year. See METRO Page 17

Streetsboro factory now has more room for Air

MAC’S SLOGAN CATCHES ON MACtion catchphrase has ‘taken on a life of its own’ since it gained buzz on Twitter By KEVIN KLEPS


f you follow the Mid-American Conference men’s and women’s basketball tournaments on social media next month, there will be a catchphrase you can’t escape: MACtion. It’s a term that isn’t easily defined, but the slogan has become so recognizable that, in the words of MAC commissioner Jon Steinbrecher, it has “taken on a life of its own.” The MAC, like any other mid-major collegiate athletic conference, has tried to separate itself from its competitors by providing something unique. With midweek college football games that are televised on ESPN’s family of networks and a catchphrase that its fans, employees and media members use to describe all the action, the Clevelandbased MAC believes it has established a strong brand in a crowded marketplace. “It’s really taken off in the last couple of years,” Steinbrecher said of the #MACtion hashtag, which is nearly as much of a part of Northeast Ohio Twitter feeds as Cleveland


MIDWEEK TV DRAWS A look at the viewership totals for the seven Mid-American Conference football games that were shown on ESPN2 in 2013: Nov. 5 — Ohio at Buffalo 0.4 rating 559,000 viewers Nov. 6 — Cent. Michigan at Ball St. 0.4 rating 592,000 viewers Nov. 13 — Ball St. at N. Illinois 0.7 rating 1.04 million viewers Nov. 19 — Kent State at Ohio 0.3 rating 435,000 viewers Nov. 20 — N. Illinois at Toledo 0.7 rating 1.05 million viewers Nov. 26 — W. Michigan at N. Illinois 0.6 rating 881,000 viewers Dec. 6 — Bowling Green vs. N. Illinois 1.2 rating 1.87 million viewers ■ Source: Sports Media Watch

Browns angst or criticism of the Cleveland Cavaliers. “Maybe a year or two ago in football is when we really noticed it,” Steinbrecher continued. “It’s something that popped up organically and, kaboom, it caught on.” See MACTION Page 11

Manufacturer based in Akron purchases massive building to add to space there By STAN BULLARD

In a sign of a tightening market for industrial real estate, the largest empty factory in Streetsboro has changed hands to provide more manufacturing capacity for Air Enterprises, a maker of massive air handling units that plans to retain its Akron headquarters and plant. The company, which produces units the size of a school bus, needed room to grow. “We need the capacity,” said Air Enterprises CEO Martin Ellis, adding, “It’s very exciting.” Air Enterprises already is starting to use the almost 180,000-squarefoot building at 1777 Miller Parkway, which the Commercial Turf Products unit of MTD Products Inc. left last summer. In a series of steps, Air Enterprises on Jan. 30 paid $5.4 million for the property, according to Portage County land records, and immediately sold it to W.P. Carey Inc., a real estate ownership concern in New York. In a news release issued Feb. 5, Carey said it paid $7 million for the building and that Air Enterprises will lease it for 15 years. Ellis declined to comment on the length of the lease. The property was not on the market for long. Jeff Calig, who headed a team of NAI Daus brokers that listed the building, said it had gone under contract in less than a month. And Air Enterprises was not the only bidder for the property. See AIR Page 7

CORRECTION ■ The Jan. 13 list of Northeast Ohio’s Top SBA Lenders should have included Liberty Bank NA, with $3,444,000 in approved loans in fiscal 2013.




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Warrensville Heights lot is a haven for fans of high-end used cars By NICK BUNKLEY Automotive News

The tightly packed rows of vehicles at Marshall Goldman Motor Sales in Warrensville Heights are unlike what you’d find at practically any other used-car store. Ferraris and Porsches are as common here as Fords and Toyotas are on a typical lot. There are Bentleys, Aston Martins, Lamborghinis and Maseratis, many with only a few thousand miles on the odometer. The cheapest Chevrolet, a 5-year-old Corvette ZR1, is listed for $74,000. All the cars are kept inside a massive showroom, safe from unpredictable Midwestern weather and would-be thieves. Drivers passing by might not even notice they’re there. “With these types of cars, you can’t leave them outside,” said Harlan Goldman, whose father, Marshall, started the business in 1978. “You can’t go anywhere in the country and see this selection, all under one roof.” Tucked away near a freeway exit ramp in Warrensville Heights, at 24661Miles Road, the store attracts customers from all over the country and many corners of the world. It sells 50 to 80 cars a month, mostly for $125,000 and up. About 125 to 180 cars are in inventory at any given time. The store owns them all outright, according to Goldman, who said the store is shooting for sales of $100 million this year. Suffice it to say the sales staff doesn’t need to spend its time haggling over a few dollars in the monthly payment. “They’ve carved out the high end of the used-car business in an incredible way,” said Dean Mueller, a longtime customer and family friend. “I can’t imagine there’s any more than a couple of places like them in the country.” Mueller, president of Dealer Tire LLC, a Cleveland company that supplies tires to franchised dealerships, said he has bought numerous Porsches from Marshall Goldman, including some older 911 Turbos with fewer than 5,000 miles on them. “They know the kind of things that I like, and when they get something in they’ll call me,” he said.


Harlan Goldman said he hopes to reach the $100 million mark in sales this year at Marshall Goldman Motor Sales in Warrensvile Heights. “They do absolutely get the best cars that I’ve seen.”

Selling ‘people’s babies’ Harlan Goldman, 38, said the dealership’s forte is low-mileage cars, many of which had just one previous owner. Customers often pay at least $100,000 less than the original sticker price for a car that still looks and feels new, he said. A 2012 Bentley Mulsanne with 5,000 miles on the odometer that cost about $350,000 new, for example, has an asking price of $220,000. “Most of these cars we have were people’s babies — sitting in their garage or in a museum,” Goldman said. “Nobody even knows they’re buying a used car.” The company works with several independent buyers who help procure inventory from across the country, though Goldman said he’s “pounding the pavement every moment” and buys about three-fourths of the cars himself. New arrivals usually spend two days getting detailed but rarely need any additional work before they’re listed for sale. Few customers actually see the store. Nine in 10 deals are done over the phone or by e-mail, and while many are paid in cash, the dealership does offer financing. Goldman estimates that only about one-third of his customers live within 200 miles. Some of those who live farther away fly in to pick up their cars, but for many the first time they see their purchase in person is when it’s delivered to them.

UPSCALE SALES ■ Company: Marshall Goldman Motor Sales ■ Location: Warrensville Heights ■ Founded: 1978 ■ Employees: 15 ■ Monthly sales: 50 to 80 used cars ■ Average sale price: $125,000 to $150,000 About 10% of customers live overseas, particularly in Europe and the Middle East. Last month, Goldman sent a Saleen S7 to John F. Kennedy International Airport in New York, where a buyer then planned to export it to his home in Kuwait. Goldman said his father, now 67, specialized in exotic cars from the beginning. The store has been in the same location for 26 years, with expansions bringing the showroom to about 26,000 square feet. This spring, Marshall Goldman plans to sell his personal collection of 40 Porsches. Among the cars are seven 911 Speedsters from the late 2000s, which will list for about $200,000 each, and some older “flat nose” 911s expected to go for about $400,000. “My father and I have made a nice living,” Harlan Goldman said. “We work very hard at it, and it’s been good to us.” ■ Nick Bunkley is a reporter with Automotive News, a sister publication of Crain’s Cleveland Business.

AMT again is getting larger home By STAN BULLARD

Construction is underway in Brecksville on a new, bigger building for Applied Medical Technology Inc., which uses the trade name AMT, just five years after the medical device maker completed its current home in Brecksville. Jeff Elliott, AMT’s chief financial officer, said the company needs more production capacity to continue its sales growth. Elliott declined to disclose sales figures. However, he said the 185-employee company has 30 job openings, with its strongest need for engineers, machine opera-

tors and production personnel. “We’re not constrained right now, but we’re close to it,” Elliott said. The new, 90,000-square-foot structure at 8006 Katherine Blvd. will be almost triple the size of the 31,000-square-foot office, manufacturing and warehouse building at 8000 Katherine that it constructed in 2008. After Geis Construction Co. of Streetsboro finishes the new building in August, AMT will move next door. Elliott said AMT will offer its existing building for sale or lease. AMT is owned by Dr. George Picha, a plastic surgeon and bio-

medical engineer. Its products include the “Bridle,” which holds nasal tubes in place for patients, and gastrostomy feeding devices. The company sells to health care institutions and medical distributors, both in the United States and internationally, Elliott said. “Everything is completed in house,” he said, from “design, engineering and manufacturing to sales.” The company has a network of domestic sales representatives around the country. Although Elliott declined to say how much the company’s sales are growing, he described its rate of growth in one word: “substantial.” ■



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Air: All of building’s suitors were planning to expand continued from PAGE 5

Bill Bishilany, Streetsboro economic development director, said he fielded phone calls about the property and that Air Enterprises was one of at least five suitors for the building. “The most positive part of the calls was that every company was looking for room to expand from a smaller building,” Bishilany said. “They were looking to grow out of a building that’s 60,000 square feet or so.” Moreover, Air Enterprises did not request government incentives. “We said, ‘Welcome,’” Bishilany recalled. According to Air Enterprises’ Ellis, the company operates in but does not own the building, which allows Air Enterprises to devote its resources and attention to its core business. And business is on the upswing for Air Enterprises, according to Ellis, although he declined to disclose the privately held company’s financial data.

Living large Air Enterprises is experiencing some lift from the tepid recovery of the building market, but it needed the Streetsboro operation because it is pursuing a bigger piece of the expanding data center construction business. The company six months ago signed an exclusive North American licensing agreement with KyotoCooling B.V. of Amersfoort, the Netherlands, which has developed a process that uses outside air to cool data centers rather than the

typical heating, ventilating and air conditioning system to relieve excess heat from the computing equipment inside. Air Enterprises provides massive, custom air handling equipment for companies in the health care, hospitality, institutional and industrial sectors, including many manufacturers associated with the auto industry. The smallest unit Air Enterprises produces is a 10-foot-square unit that cools dryers at industrial laundries; its larger units are 14 feet wide, 50 feet long and 12 to 25 feet tall, though they can be stacked as high as 50 feet. When the units are assembled, they are large — and that is where Ellis said the new Streetsboro property comes into play. Air Enterprises will continue to have its design, engineering and parts-forming operations in Akron, where it employs about 200 people, and is shifting some assembly to the new plant. The units for data centers specifically will come out of the Streetsboro plant, Ellis said, “which is opening the door a lot wider for us to grow.” The company opted to go to two properties because it could not find one large enough to meet its needs. Air Enterprises also wanted to avoid the down time and potential employee dislocation from moving out of Akron, where it has operated for 50 years. It has been in its current Akron home, at 735 Glazer Parkway, since the 1970s. About 40 employees initially are working in Streetsboro, but the

OnShift secures another $7 million After raising $7 ON THE WEB Story from should help it find million from investors, customers, too. OnShift can be even The venture capital more aggressive in its effort to refirm, with offices in Boston and San place the archaic systems that Francisco, already has put OnShift many nursing homes and other elin touch with several large organizader care providers still use to mantions that provide health care to seage employee schedules. nior citizens. The firm’s partners The fast-growing Cleveland softand the health care companies it inware company raised the money vests in have deep relationships from HLM Venture Partners and its “across the spectrum of health existing investors. care,” Woodka said. OnShift will use the money to add OnShift wants to be more aggresbetween 20 and 25 employees to sive so it can scoop up a large its staff, which consists of 60 peochunk of the market while it’s still ple today, said CEO Mark Woodka. available. Most of the elder care To house them, the company is in providers OnShift sells to don’t use the process of leasing the rest of software designed to help them the space available next to its ofmanage employee schedules, prefices on the 14th and 15th floors of vent overtime and automatically the Keith Building on Euclid Avenue reach out to available employees to in downtown Cleveland, Woodka fill open shifts, Woodka said. said. The space had been empty, “We’re replacing a piece of paper he said, adding that the company or an Excel spreadsheet,” he said. will occupy a total of 23,000 OnShift has shown that it can help square feet once renovations are its customers “dramatically reduce complete, up from 12,000 square overtime, save time scheduling and feet now. Employees will be added handling employee call-offs, and imthroughout the company, but many prove their staffing levels,” HLM of them will work in sales and marpartner Marty Felsenthal said in a keting, he said. news release announcing the investThey should help speed up Onment. Shift’s already rapid growth. The Also contributing to the $7 million company’s software is used to “Series C” round were Draper Trianschedule employees and to manage gle Ventures of Pittsburgh, Early call-offs at more than 1,100 health Stage Partners of Cleveland, Fifth care facilities, up from about 500 in Third Capital, Glengary LLC of February 2012. Beachwood and West Capital AdviOnShift’s relationship with HLM sors of Cincinnati. — Chuck Soder


Akron-based Air Enterprises installed this massive KyotoCooling unit at Bell Canada. company expects to add workers there as its business grows, Ellis said. Ellis declined to say how much

Air Enterprises will spend adding equipment and upgrading the Streetsboro property, which dates from the 1980s. However, Bishi-

lany, Streetsboro’s economic development director, described the investment in the plant, including updating its exterior, as “sizable.” ■


Our March edition will continue to inform readers on the markets and developments affecting the Utica shale - and how the ramp up in drilling activity is impacting the communities and businesses in and around Ohio’s major shale play.




March 31

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FEBRUARY 10 - 16, 2014


John Campanelli ( EDITOR:


Scott Suttell (


It’s the jobs


t’s OK to shed tears over United Airlines’ decision to end hub operations at Cleveland Hopkins International Airport. But let’s let them fall for the right reason. No one should be wailing over the damage the loss of hub status supposedly inflicts on Cleveland’s reputation. Columbus doesn’t have an airline hub operation; neither does Indianapolis. Yet no one we know would say those Midwestern cities are not desirable towns to live and work. The same is true of Raleigh, N.C., and Austin, Texas — two of the fastest-growing U.S. cities, both without hubs. That’s why we find silly the suggestion by one local economist that the loss of United’s hub puts Cleveland on the road to becoming a backwater town. If hub status is one of the most important economic arrows in Cleveland’s quiver, then someone may as well turn off the lights now because the city must not have much going for it in the way of other assets. And we don’t believe that’s the case. We’re also not ready to whimper about the reduced number of flights United will run out of Hopkins once it scales back operations. Nature abhors a void, and so do air carriers. They tend to pounce on available routes where they believe they can make money. We can’t say where or how soon other airlines will pick up some of United’s slack. But if enough passengers show interest in flying to a particular city, our bet is that some airline will be willing to accommodate them. If locals should cry over anything, it is the pending elimination of the jobs of 470 United employees, plus the indirect job losses that likely will occur due to reduced activity at Hopkins. Those losses truly are worth mourning because they impact the lives of families throughout our community and are a direct hit to the health of our economy. Jobs in mass quantities are not easy to come by, at least not in Northeast Ohio. As Crain’s Jay Miller revealed in a Dec. 9 Page One story, civic leaders had to work feverishly for eight months to convince Nestlé — a company that already is here and knows the region well — to bring 250 more jobs to Solon by moving its frozen pizza division here from Illinois. Winning the Nestlé operation in a top-secret competition with other cities was considered a big victory. Even so, the division is bringing just half as many jobs as United is about to ditch here. It takes a lot of companies adding 10 jobs here, 20 jobs there and 50 jobs somewhere else to make up for the job losses a large employer can inflict with a single action. Consider the efforts of regional business attraction group Team NEO. It recently boasted that nearly 1,400 new jobs were coming to the region due to its recruitment efforts and those of other economic development organizations. Yet it took Team NEO recruiting a record 16 companies to Northeast Ohio in 2013 to bag those jobs. Losing United’s hub makes Team NEO’s job a bit tougher, but not anywhere close to impossible. So let’s quit sniveling and instead focus on what really keeps and attracts employers — creating a deep and wide pool of prospective employees by growing our own talent and by becoming a magnet for bright people elsewhere.


A distaste for what United has served service Continental Airlines brought to its customers. In a lot of ways — lost jobs and flight options aside — this JOHN is a bit like a mediocre restausick. But I’m also not going to CAMPANELLI rant closing in the neighborhood. The unemployed step out on the ledge of my ofservers, the economic impact fice. (Besides we’re only on the and the reduced eating opthird floor.) tions might hurt, but we will My thoughts might not be move on. coming from a clear mind of I’m not trying to be flip. I objectivity at the moment. understand the damage this Cleveland has been rejected may cause to our region. But once again, and it’s natural for it’s tough to advocate for the us to react by telling United to hub — which we all did — not let the cabin door hit them while you merely tolerate its service. as they sneak their lousy hub out of Last month, The Wall Street Journal, town. using data from the government and I need to confess that I may never be FlightStats Inc., released an airline scoreable to be objective about United, not afcard. It ranked nine major U.S. carriers ter I spent half a day — and nearly a in categories such as delays, mishandled night — at O’Hare when a flight to bags, cancellations and complaints. Akron-Canton was suddenly canceled United finished in the middle or bottom last year. (After waiting a half-hour in half in all seven categories and was line to get re-booked, the agent then ranked dead last overall. (Alaska Airlines mistakenly handed me a boarding pass for a flight to Altoona, Pa. … It’s almost was tops, followed by Delta.) Akron, right?) Adding to the annoyance — like getI’m hardly the only person around ting bumped from a United flight — is here who pines for the punctuality and the implication that somehow Cleveland


’m not going to say that losing the United Airlines hub is a good thing for Greater Cleveland. It’s not. Lost jobs make me

is to blame. United says it hasn’t made a profit on Hopkins in years, subtly suggesting that maybe we didn’t provide support. It’s like that two-star restaurant blaming its customers when it’s forced to close. Maybe if United upped its game, lost less luggage and cut cancellations and delays it would see Cleveland — and the rest of its operations — doing better on its balance sheet. The airline business is brutal. The cost of fuel, staff, capital, infrastructure, maintenance — it’s staggering. Margins have been estimated at less than 1%. It’s no surprise that fees grow and the space from your knees to your chin shrinks every time you get on a plane. But profitability is not impossible in the business — Southwest has made money for 40 consecutive years — nor is it impossible in Cleveland. I believe that. And I think it won’t be long for other carriers to move in or expand their service at Hopkins. If there’s money to be made, look for a new “restaurant” or a few “cafes” taking up the lost space in Concourse D. And this time, we might actually want to eat there. ■

TALK ON THE WEB Re: United eliminating hub ■ If Cleveland Mayor Frank Jackson had any credibility, he’d fire airport system director Ricky Smith immediately. This is a major blow to Cleveland and an embarrassment to the mayor. Smith just borrowed $70 million to buy two private parking lots on Snow Road, and the original owners will remain and get paid to run them while United complains of landing fees. Smith raised costs to pay for the parking lots. And this is after tearing down the garage, which tells United we expect fewer users of the airport. Instead, Smith should have found a way to keep the hub and not by asking everyone to pay more. In this economy, who wants to pay more? It’s time for Smith to go. He costs this city way too much and clearly dropped the ball. We need smart and competent leaders. — Dave Wilson

Reader responses to stories and blogs that appeared on:

■ I travel three weeks a month and attempted to use United for travel every time. I did manage to maintain Gold status, but I ended up connecting through Chicago nearly every trip. Unfortunately, Akron-Canton Airport often offers more directs for much less. — Jim Haviland ■ I think anybody in Cleveland saw this coming when United acquired Continental. While Continental was loyal to Cleveland and did a great job for the city, United already had left Cleveland high and dry previously. I fly Southwest any time I can. They are as transparent as United is opaque. — soccerfaynes See WEB Page 9

POLL POSITIONS What's your reaction to United Airlines' decision to drop its Cleveland hub? It's a huge blow to the city

63.3% It's bad, but Hopkins can replace the lost flights

31.2% It's not a concern; flight options here are good Based on 110 responses at: 5.5%



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Perhaps it’s time for a Cleveland Tomorrow II. The concept served us well in the 1980s and 1990s. Without government support or participation, the local chief executives deliberated and set priorities, chose among workable solutions, and then ultimately acted on the region’s problems. Unfortunately, the late Richard Shatten is not available to act as managing director. Why now? We’re at a point where our considerable assets in which we take justifiable pride are being constantly eroded by our liabilities, with the gulf growing wider. The statistics are not reassuring, and it is worrisome to think where it all might lead. On the positive side, we have many assets. Our pluses are impressive, and most have been with us for many years. They typically are closely associated with cities more populous than we. They include the following: ■The Cleveland Museum of Art has just completed a modernization that gives it a new structure, with an impressive atrium. It is a totally new experience. ■ The Cleveland Clinic keeps on growing. As one of the nation’s leading cardiac care hospitals, it offers services to international patients also. ■ The Cleveland Orchestra continues to rank among the world’s finest. Combined with its summer home at Blossom, classical music is available all year long. ■ WCLV in its new status as a non-commercial radio station appears to be well-positioned for the future. It is the voice of the Cleveland Orchestra. ■ PlayhouseSquare offers a complex of theaters that attracts diverse audiences. The offerings appeal to many tastes, from classical to modern. Yet for all these first-class advan-

Herb Kleiman is president of Kleiman Associates, a marketing communications firm specializing in high technology, in Shaker Heights tages, Greater Cleveland is struggling to find itself in the 21st century. One criterion in this judgment is the inability to draw large-scale corporations to establish their headquarters here. When companies such as BP-Sohio, TRW and OfficeMax leave the area, their loss is deeply felt, and not just the lost tax revenue. They have left here to seek their fortunes elsewhere. Indeed, recent indicators suggest that we are experiencing a downturn with long-term implications. The most important is the message of who we are and, more importantly, who we want to be. We have, perhaps inadvertently, projected a confusing image. Consider our downtown area — the centerpoint for Greater Cleveland that has always been the city’s showpiece. But it is much more than that because it conveys who we are. For instance, New York City’s centerpoint is Manhattan’s Columbus Circle, near Central Park and a mile from Times Square. And Washington, D.C., has its centerpoint south of the White House and north of the Washington Monument. Both convey the essence of those cities. For us, it is a casino. Granted, such an institution serves several needs. Instead of an empty space, it offers a business generating taxes and jobs, and also helps create an excitement — a magnet of sorts. But do we sacrifice a reputation as the country’s home of the most skilled blue-collar workers? Combined with this image problem, three other key factors raise concerns: ■Population erosion. Greater Cleveland has been affected negatively by events of the past half cen-

tury that accelerated in the last decade. The recent recession, difficulties of the auto industry, a longterm shift to non-union jobs in the Southern states, and competition from foreign companies both in the United States and international markets have all taken their toll on U.S. core industries. But it has been worse for us. From 2000-2010, the local population dropped 76,000, with a loss of 17% placing us next-to-last among the nation’s cities (Youngstown ranked last). And the last four months of 2013 saw no improvement. ■Job loss. Cuyahoga County, home to the second-largest city in the state, is cited as the fastestshrinking county in Ohio. In one year, between August 2012 and August 2013, Greater Cleveland lost 7,900 jobs. Since May 2013, the Cleveland-Elyria-Mentor area has lost more jobs than any other large metropolitan area in the nation. Partially they have been replaced by non-manufacturing positions, which pay significantly less. ■ Deteriorating student performance. Cleveland recently scored second-to-last out of 21 large-city school districts (Detroit was last). Out of the 11 large-city districts measured in detail by a national board, Cleveland was the only city not improving over the last decade. Last year’s state report card declared the district to be in academic emergency, with about half of our students failing to demonstrate even basic skills. So where do we go from here? Obviously, we cannot return to the manufacturing skills that once made Cleveland a city to be envied. But we can support a Cleveland Tomorrow II by seeking a leader with vision, perhaps a retired CEO. He would have to both understand the economic landscape and have the clout to make the tough decisions that are inevitable. ■

Web: Courtesy titles are sign of respect continued from PAGE 8

Re: No more ‘Mr.’ or ‘Ms.’ in Crain’s ■I heartily disagree with your policy change on courtesy titles. As an attorney, the use, in court and out, of titles shows respect for both the participants and the forum. As a businessperson, the use of titles shows respect for those with whom we desire to trade. As a newspaper about business, your use of titles shows respect for the subjects of your articles, the passion and dedication they bring to their work, and for yourselves as observers we allow into our world. — William Ferry

Re: Sin tax extension ■Twenty years at, let’s estimate, $15 million per year (the first 15 years of the sin tax brought in $16 million per year before the recession), is a total of $300 million. Why should Cuyahoga County citizens of lower economic status be dispro-



Now is ideal time for Cleveland to plan for a better tomorrow By HERB KLEIMAN



portionately penalized for the combined 2.5 million home attendees to Browns, Cavaliers and Indian games? No, really, why? How much benefit do you personally accrue simply by having an NBA, NFL and MLB team here? Are the poor families the huge beneficiaries of having the teams and facilities here? How much does a family making less than $43,861 per year (the median Cuyahoga County household income) benefit from having the teams here? With a poverty rate of 17.7% (less than $15,000 per household per year, 2.3 persons per household) who has the chutzpah to tax these people even more? Who would be opposed to a $6 user fee collected from each of those 2.5 million home-game tickets? This can be justified by showing how much it costs for the facilities, the security staff, access to the facilities, even the temp workers who come to clean up the mess after the game. — Robert E. Chalfant

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FEBRUARY 10 - 16, 2014

GenomOncology receives investment from Tenn. firm By SCOTT SUTTELL

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ON THE WEB Story from:

GenomOncology, a Westlake company that has developed software platforms to automate the analysis of sequenced genetic information, received an investment from TriStar Technology Ventures, a health care innovation venture firm based in Nashville, Tenn. It did not disclose the size of the investment. Dr. John Doulis, chief information officer of TriStar’s partner fund, MedCare Investment Funds, also was named to GenomOncology’s board of directors. That board already includes GenomOncology president and CEO Manuel J. Glynias, a serial entrepreneur who in the late-1990s founded NetGenics, a venture-backed provider of discovery informatics to biopharmaceutical companies and academic research centers; Bradley Wertz, former president and chief operating office of interactive marketing firm Rosetta; and Lee Zapis, principal of Zapis Capital Group. Glynias declined to discuss the size of the TriStar investment. However, he said the investment “puts us in a position that we have plenty of money to operate the company comfortably for the next couple years.” GenomOncology was founded in May 2012 and has grown to 14 people, Glynias said. He would not say

how much money the company has raised to date, but he noted that GenomOncology is beginning to produce cash from its products. “We’re generating real revenue,” he said. “It’s not enough to pay the bills just yet, but it’s real revenue.” In collaboration with researchers and physicians, GenomOncology has developed two proprietary software platforms that streamline the use of next-generation sequencing in medicine and research. The GO Clinical Workbench “enables the molecular pathology laboratory to translate next-generation sequencing data into actionable information for oncologists,” according to the company. GenomAnalytics “allows researchers to analyze one or hundreds of genomes simultaneously to identify causal variants and create a knowledge base.” Last week, GenomOncology announced the University of Pittsburgh has begun using GenomAnalytics “to explore and mine the breadth of data that exists” in The Cancer Genome Atlas. The atlas is a data portal established by the National Institutes of Health that allows researchers to analyze multidimensional maps of the key genomic changes in major types and subtypes of cancer. ■

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MACtion: Midweek football games on ESPN have added to notoriety continued from PAGE 5

The birth of MACtion MACtion seemed to get its start in 2008, when the popular college football blog Every Day Should be Saturday mentioned it briefly in reference to a game between Miami and Bowling Green that was taken off the air in the fourth quarter in favor of an Ohio State-Michigan State matchup. Two years later, the site’s editor, Spencer Hall, mentioned MACtion in five additional stories. In 2011, the hashtag went mainstream, thanks in large part to Northern Illinois’ 63-60 win over Toledo in a Nov. 1 college football game that featured more points than some basketball games. “Ever since then,” said Jeremy Guy, the MAC’s director of communications, “we said, ‘We should really use this.’” The conference has. A lot. “GET SOME MACTION” T-shirts are available for sale on the conference’s website, MACtion shirts in various school colors will be available at Quicken Loans Arena during the hoops tournaments next month, and the slogan is used on signage, program covers and other promotional materials. Most of all, it’s prevalent on Twitter whenever the conference’s 13 members are playing. MACtion — without the hashtag — also is in the process of being trademarked. “You can’t trademark a hashtag,” said Steinbrecher, who admitted that was news to him until the conference started the long process of making its catchphrase official. But it was the hashtag that took MACtion from something fun mentioned in a blog to a real-time description of anything interesting happening in an athletic event. “The night I really noticed it was the Toledo-Northern Illinois football game a couple seasons ago,” said University of Akron director of athletics Tom Wistrcill. “That was when I think it went from being a cool little thing to something nationwide that people could attach themselves to.”

So what is it, anyway? In an amusing 49-second video

the conference posted on its football media day last summer, athletes were asked to define MACtion. The video starts with football players stumbling over their words, saying “that’s a tough one” and they have “no idea what that word means.” It ends with a pair of players saying the slogan means the MAC “has action.” Steinbrecher, Wistrcill and Kent State director of athletics Joel Nielsen have a better handle on the definition. ■ “Exciting, close finishes, and great student-athletes with compelling stories,” SteinSteinbrecher brecher, the conference’s fifth-year commissioner, said of MACtion. ■ Said Kent State’s Nielsen: “It’s a great brand presence for us that has started to differentiate us maybe from some of the other leagues.” ■ Akron’s Wistrcill agrees, saying the catchphrase defines “the unique brand of athletes that we have here in the MAC.”

A big boost from the gridiron The MACtion craze began during a Tuesday night football game in November 2011, which is fitting, because the midweek matchups on the gridiron have been more critical to the conference’s branding efforts than the slogan itself. The MAC’s Tuesday and Wednesday games, which most often are shown on ESPN2 and ESPNU, averaged 470,000 viewers in 2012. This past season, the six Tuesday and Wednesday games that were televised by ESPN2 drew between 435,000 and 1.05 million viewers, according to Sports Media Watch. The four games that were shown by ESPNU all had fewer than 200,000 viewers, but three of the broadcasts went head-to-head with a MAC game during the same time slot on ESPN2. The conference championship game between Bowling Green and Northern Illinois on Friday, Dec. 6, had 1.87 million viewers on ESPN2

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— an increase of more than 600,000 from the 2012 MAC title tilt. That’s a lot of eyeballs. And thousands of in-game #MACtion tweets. “The midweek games have provided a vehicle to raise the profile,” Steinbrecher said. “That goes hand in hand with really good performances on the field. That’s really the linkage.” The MAC is five years into an eight-year contract with ESPN that pays the conference about $1 million annually. The conference, because of the popularity of the Tuesday and Wednesday football games, would like to redo the deal, according to two sources. Steinbrecher sidesteps that possibility, aside from saying the MAC is “always in conversations with our partner.” Bristol, Conn.-based ESPN sends tweets during the midweek games that include the #MACtion hashtag from both its main Twitter account, which has 8.8 million followers, and its “SportsCenter” handle, which has more than 6.8 million followers. “If you look at the conference the last six or seven years, it’s really been on an upslope,” Steinbrecher said. “You need to do that, as well as have the platform to sell your message. That’s what that (the ESPN audience) provides. Then it all comes together.” Throw in a cool hashtag, and it has been a recipe for mid-major success. “It’s something we can use to stand out,” said Guy, the director of communications who is constantly tweeting #MACtion tidbits and promotions to his nearly 5,000 followers. “It’s our brand. It’s what everyone gets behind.” ■


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EDUCATION CLEVELAND STATE UNIVERSITY: Anton A. Komar to director, Center for Gene Regulation in Health and Disease.

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ENGINEERING A SAFER WAY TO SLEEP Naturepedic founder went from searching for a crib mattress to creating new models By EILEEN BEAL


n 2003, Barry Cik’s wife sent him out to shop for a crib mattress and other baby products for the couple’s soon-to-beborn first grandchild. Cik is a certified expert in hazardous materials management and remediation, author of a textbook on environmental assessment and chief environmental engineer at Cleveland-based G.E.M. Testing & Engineering Labs.

He was so shocked and dismayed at all the toxic substances — fire retardants, chemical plasticizers, anti-microbial pesticides, etc. — that were used in the mattresses and other items he looked at that he went home empty handed. And on a mission. “I was uniquely qualified to understand what those substances can do (in the human body),” he said, “so I knew that I could make something healthier for my grandchild to sleep on.” See SLEEP Page 15


Barry Cik was motivated to start Naturepedic after shopping for a crib mattress for his first grandchild in 2003.

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Companies are more sensitive to protecting information Hackers are getting smarter, which means businesses must be more vigilant, experts say By CHUCK SODER


arry Nelson” is probably not who he says he is. Larry’s polished LinkedIn picture, and the vague profile that goes with it, were the first clues that led Jay Mellon to believe he was being targeted by a hacker trying to connect with people at local information technology companies. So instead of accepting this person’s invitation to connect on LinkedIn, Mellon — co-owner of AtNetPlus, an IT services firm in Stow — did some investigating. Using the image search function on Google, he discovered that the face in the picture belonged to Broadway actor Norm Lewis. And the only LinkedIn recommendation for “Larry Nelson” comes from “Lewis Elder.” Who’s he? A local “computer consultant” who bears a striking — striking! — resemblance to a Scottish sports broadcaster named Dougie Donnelly.

Hackers are getting smarter, according to Mellon and other IT experts. Sure, some of them still send out mass-produced emails from Nigerian princes who want to stash millions of dollars in your bank account (assuming you pay a fee upfront, of course). Today, however, many of them are much better at “phishing” for victims. They send emails that look like the ones you get from your bank or your college. And some of them use an even more sophisticated tactic called “spear phishing,” which is where a hacker targets people who work for specific industries or companies in an attempt to gather sensitive information, often by infecting their computers with viruses or other forms of malware. So businesses and their employees have to get smarter, too, because technology can’t always prevent their mistakes.

‘They’re going to get in’ LinkedIn in January filed a lawsuit against unknown hackers who use software to create fake profiles, which then copy data from other member profiles, perhaps to sell it to third parties. It’s unclear whether that’s why “Larry Nelson” was born, but hackers also could use the profile to send links to websites infected with malware, Mellon said. Or they could use it to ask some

innocent-seeming questions designed to trick him into giving up sensitive information. But Mellon is a hard target: He regularly conducts training sessions designed to help AtNetPlus clients surf the web safely. Businesses, he said, need to work hard to institute a culture that emphasizes thinking before clicking on any link or attachment. Employees who are trained to be skeptical are less likely to infect their computers with malware, Mellon said. He cited data from about a dozen AtNetPlus clients who listened to his presentation on the topic. Afterward, the number of malware infections they reported fell by roughly 50%, he said. Over time, however, the number of infections typically starts to go back up, as employees forget what they learned and new people are hired, Mellon said. That’s why companies need to keep reminding employees to be vigilant, he said. “The first thing you can do is raise awareness,” he said. The threat of being targeted by sophisticated spear-phishing efforts is greater for bigger companies and companies with access to important information, such as law firms and defense contractors. See INFORMATION Page 15


The LinkedIn picture that goes with the profile of “Larry Nelson” is actually an image of Broadway actor Norm Lewis. “Larry Nelson” isn’t the only questionable LinkedIn profile showing up as part of the area’s business community. Learn more about “Larry” and his friends. PAGE 15



2:37 PM

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FEBRUARY 10 - 16, 2014

Businesses must be ready when big trouble hits Data recovery is ‘only one small piece’ of what a company will need after disaster By MICHELLE PARK LAZETTE


hile the title of a recent lunch-and-learn program played off the current popularity of the walking dead, the Jan. 29 event “Can Your Business Survive a Zombie Apocalypse?” advertised real reasons why business owners should prepare for threats that could drain — or worse, end — their companies. Fire was one. Hurricane Sandy was another. Such preparation appears particularly prudent, considering this: ■ The Ohio Insurance Institute, in an April 2013 report, noted that four of the five costliest years for insured losses (commercial, homeowners and auto) in Ohio have occurred since 2008, much of it attributable to extreme weather events. ■ And the number of near or $25 million-plus insured loss storms in Ohio between 2010 and 2012? It tops the number in the entire previous decade (2000 to 2009). But it’s not just storms that business executives have on their radar. Following the news of the National Security Agency’s secret surveillance program, business executives have voiced more concern about protecting their data, said Ken Fanger, president of On Technology Partners. He presented last month at JumpStart Inc. during the first of the lunch-andlearn series, for which One View Communications in Cleveland is a partner. Though his Cleveland company makes its money on data design and consulting, Fanger says too many companies are planning for data-related what-ifs and little else. “Companies are becoming very narrow-minded,” he said. “A dis-

aster recovery plan needs to be more than a data recovery plan. That’s only one small piece of an entire disaster recovery puzzle. “When I say, ‘What is your disaster recovery plan for your company?’ (I hear), ‘Well, my server is backed up,’” he added. “Well, what if you have a fire? ‘Well, I don’t know.’ What if your key employee leaves and you can’t sell? ‘Well, I don’t know.’” So, Fanger is seeking to spread the word about what more companies can do before it’s “too late.”

Avoid getting burned Joe Saccone watched his company’s restaurant burn early one morning in October, so he knows firsthand and real time, in a sense, the importance of having insurance and an internal plan for handling disasters. Within hours of what Hyde Park Restaurant Group executives have been told may be a total loss of Jekyll’s Kitchen overlooking Chagrin Falls, its people were following the plan, calling customers who had reservations and employees and helping to transfer both to other restaurants the group operates, where possible. The damage will exceed $1.5 million, estimated Saccone, a managing partner. “Every day that goes by, we’re one day closer to opening, and that’s how we’re going to look at it,” he said. But, according to the Insurance Information Institute, an estimated 25% of businesses never reopen following a major disaster. In an email it distributed in the fall titled “What Businesses Learned from Sandy,” the institute stressed the importance of forming a disaster response plan and reviewing insurance, including business interruption coverage. The importance of that type of insurance, which covers, among

other things, lost revenue if a business becomes uninhabitable, is a lesson some merchants at Cleveland’s West Side Market reportedly learned the hard way when the market suffered a fire this time last year. For nonprofit ACCESS Inc. in Akron, a three-day power outage following Superstorm Sandy was enough to spur action. While the organization, which provides emergency shelter for more than 500 mothers and children a year, had a “safety plan” that identified other locations for its people to go, its executives weren’t satisfied that its data was protected sufficiently, said Lynn Budnick, executive director. “Had it been more drastic — water damage, wind damage — we would have been really in deep trouble,” she said, citing the financial information and client medical data ACCESS keeps. “All of that had the potential of going away.” In October 2013, the nonprofit hired Area 51 Consulting, an Akron IT managed services provider, and in January, its data began being backed up on the cloud.

‘One bite at time’ Though there are examples of companies taking action, a number of providers of disaster recovery and business continuity planning say they’re not seeing a spike in demand. “It’s the least exciting thing to worry about; it’s dread,” said Dominic Bonacci, chief operating officer for BEP Institute — Your Emergency Planning Resource, a Rocky River-based consortium of business continuity and disaster recovery providers in Northeast Ohio. “It’s too big for people to worry about, so they don’t,” he added. “The way you eat an elephant is one bite at a time.” There’s a difference many don’t understand between business continuity and disaster recovery planning, On Technology Partners’ Fanger said. Business conti-

BEFORE THE UNTHINKABLE STRIKES Do: ■ Design a plan that is simple to implement. When in a panic, no one will be inclined to use one that’s thick and complex. ■ Determine who the key people in times of crisis would be and involve them. ■ Plan for all you can: operating without power, supplies, etc. ■ Develop a strategy for satisfying customer needs, perhaps through outsourcing product or acquiring substitutions. ■ Involve your accountant in the calculations for your business interruption insurance, which covers lost revenue, operating expenses and more in the event a business becomes uninhabitable after a loss. ■ Know and negotiate (before you bind coverage) the amount of nuity plans provide for the maintenance of operations while a major event occurs, he explained, and often involve redundant systems and processes. They are most important for businesses that make high profit in a tight timeframe. Consider, for example, a radio station that attracts most of its listeners and advertising during rush hour, he said. A business continuity plan might set forth what it would take and cost to keep the station on the air in the event of a disturbance. More businesses tend to have disaster recovery plans, Fanger said. The difference between the two is like that between a militarygrade tire that runs when it is flat (business continuity), and a spare that serves as a temporary fix (disaster recovery).

Supply side Getting a “heavy look” these days when it comes to business continuity planning is supply chain risk, according to Jeffrey Schwab, senior vice president and

time your business must be unable to produce before insurance will cover an interruption.

Don’t: ■ Throw money toward things that don’t help or matter to you. Think hard about what it is you want/need to recover, be it formulas, client lists, etc. ■ Assume you have the full insurance coverage you need/want. There are exclusions in every policy. ■ Figure the amount of insurance you’ve always had is enough, especially if your business has grown.

Sources: On Technology Partners in Cleveland; Summit Insurance Agency in Hudson; Oswald Cos. in Cleveland; Aon Corp. in Cleveland; Alex N. Sill Co., Loss Consultants and Appraisers in Seven Hills practice leader for private equity services for Cleveland insurance brokerage, Oswald Cos. The suffocation of supplies following the Japanese tsunami in 2011 is one motivator. “As you’re going more global, are you knowing what the businesses that you’re contracting with, do you know what their backup plans are, what their business continuity plans are?” he said. “They go out of business, you go out of business.” The way Marc S. Byrnes sees it, one of the greatest risks that exists in terms of business continuity is a lack of succession planning. “People should be pre-qualified, mentored (and) trained,” said Byrnes, chairman of Oswald Cos. “You pick the industry, and I’ll tell you the key thing there is picking succeeding leaders. The business won’t succeed without it. “Start one,” he urged. “People have this notion that they’re immortal; they think life’s just going to go on, be sunshine and blue skies. But it doesn’t always work out that way. You have to plan.” ■

It can be favorable to consider personal goodwill in sale


ransitioning the ownership of a business can be a challenge. On top of the many practical issues involved, tax issues need to be addressed as early in the process as possible. This is especially true when the business is structured as a C corporation. While most small businesses formed in the last 20 years have been formed as LLCs or S corporations, many still are structured as C corporations. Historically, there were good reasons for operating a small business as a C corporation, and there still are reasons to favor the form. However, a C corporation is taxinefficient when it comes time to sell the business if the buyer wants to buy the assets of the business. An asset sale by a C corporation will usually generate one layer of gain recognized at the corporation level (at ordinary income tax rates) and a second level of tax at the shareholder level upon a distribution of the remaining sales proceeds.


TAX TIPS Under the right fact pattern, one technique that can reduce the tax owed on the sale of assets is having the owners sell their personal goodwill. The concept of personal goodwill sounds somewhat odd, but if a buyer is willing to pay $2 million for the business of an accounting firm operating as a C corporation (for instance), much of that purchase price is likely to represent payment for the goodwill value of the business. Consider whether the goodwill being sold belongs to the shareholders of the accounting firm or to the company.

Obviously some goodwill belongs to the company as a going concern with employees, name recognition and other intangible assets. But the biggest source of intangible value — the relationships with clients — often is more closely associated with the owner/service providers and not the company. If your accountant ever left his or her old firm to go to a new firm and you continued to use the accountant, you know that much of the goodwill associated with the accounting firm belongs to the accountant, not the firm. If the shareholders can sell their personal goodwill as part of the sale of assets of the business, this eliminates the corporate-level tax on that part of the value attributable to the personal goodwill. In addition, the gain on the sale of goodwill will be taxed to the shareholder at favorable capital gains rates. The amount of the overall purchase price that can be attributed to personal goodwill is a valuation issue that depends on

the facts and circumstances of the particular business and the shareholders’ roles in that business. Courts have recognized the economic reality of personal goodwill and have been willing to honor a separate sale of personal goodwill in connection with a sale of the assets of the related C corporation. The keys to establishing that personal goodwill exists are that the shareholder of the corporation has the relationships with the customers that generate the business for the corporation, and that no restrictions (such as an employment or noncompete agreement) exist with respect to the transfer of those relationships. This rather simple concept can get complicated quickly. For instance, in most cases if the shareholder has an employment agreement, the ability to sell personal goodwill will be limited. Some business owners have sought to avoid this issue by terminating the contract shortly before the sale. At least one court ruling reasoned that even if the

termination was effective, all of the goodwill generated up until the time the employment agreement was terminated belonged to the corporation and not the shareholder. Also, there are challenges where there are multiple shareholders, because it is unlikely that all the shareholders (who probably all expect to receive a proportionate share of the sales proceeds) would own personal goodwill in the exact same ratio as their share ownership in the business. Owners of C corporations considering a sale should think about whether some of the value of the business should properly be characterized as personal goodwill. Many fact patterns will not support the existence of personal goodwill, but under the right circumstances, a separate sale of personal goodwill can provide meaningful tax savings as compared to a sale of corporate goodwill. Grassi is president of McDonald Hopkins LLC.



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FEBRUARY 10 - 16, 2014


‘Cal’ and friends seem Sleep: Marketing without all the glitz to have a lot in common continued from PAGE 13


hoever created the profiles we just blocked from the Crain’s LinkedIn group appears to be a big golf fan. We’ve identified five “people” on LinkedIn who claim to be members of the local business community. They look real — they’re connected to lots of prominent Clevelanders, and they’re members of other local LinkedIn groups, such as the Cleveland Social Media Club and the Northeast Ohio Software Association. But the profiles are almost certainly fake. Take Calvin “Cal” Peete, for example. His profile says he runs Peete Accounting Services and attended Cuyahoga Community College. But his photo belongs to a pro golfer named Curtis Strange, who won the U.S. Open twice in the late ’80s. And “Cal” happens to share his name with the most successful black player on the PGA Tour, pre Tiger Woods. Even so, our friend Cal has 73 of those endorsements that some LinkedIn users hand out so freely, many of them from real people in Northeast Ohio. Of course, many come from people like “Jim Thorpe.” He says he’s a local web designer, but until last week he used a picture belonging to a former pro golfer from New Zealand named Frank Nobilo. And his name belongs to another golfer who finished a prison sentence in 2011. Jim (who now uses a generic photo we found

CONNECT WITH CRAIN’S Join Crain’s LinkedIn group (if you are a real person, of course) to take part in an ongoing discussion on accepting connections. on two other websites) even wrote a vague recommendation for Cal — as did someone else whom we’ve confirmed is an actual person (he says he doesn’t know the guy and admits he should curtail his open recommendation policy). Cal’s friends like to steal photos: Nancy Olsen’s image also appears on an video called “How to Wear a Blouse Under a Business Suit,” Lewis Elder appears to be the identical twin of Scottish broadcaster Dougie Donnelly and Larry Nelson probably should get a job as a stunt double for actor Norm Lewis. Why do these profiles exist? We’re not sure. LinkedIn is in the process of suing “John Doe” hackers who allegedly use software to create fake profiles that can get access to data and sell it to third parties. But hackers also could use this tactic to gain your trust — before sending you a link to a virus, according to Jay Mellon, a partner at IT services firm AtNetPlus, who spoke to us for an IT security story that appears in this section. “Larry Nelson” sent Mellon a request to connect on LinkedIn, noting that they both belonged to the Crain’s LinkedIn group. — Chuck Soder

Information: Seeking weak links continued from PAGE 13

For instance, a few years ago one or more hackers broke into a large local law firm’s computer network by targeting the wife of one of the firm’s partners, according to Matt Neely, director of strategic initiatives at SecureState in Bedford Heights. Whoever sent the email knew that she liked dogs and was able to name one of her Facebook friends. The hacker asked her to click on a flier promoting a party organized to benefit an animal shelter — but the file contained malware. When her husband logged onto the computer, the hacker broke into his law firm’s network, Neely said. He believes that hackers were after data related to an acquisition the law firm was working on for a client, which was bidding against a competitor in China. Companies with sensitive data can protect it by isolating it, Neely said, noting that SecureState helped a local manufacturing company set up its network so that employees could access its proprietary formulas only from certain computers. But they also should make sure their IT teams are monitoring their computer networks and know how to react if there’s a security breach. “You need to assume they’re going to get in,” he said.

Control the access So you run a small business that doesn’t possess lots of sensitive data? Malware still can cripple your computers. Even companies that use antivirus software, firewalls and other technology often get infected because of human error, according to Chuck Mackey, senior managing

director at Avantia, an IT services firm in Valley View. “The weakest link is the individual,” he said. Companies should regularly remind employees to change their passwords and be suspicious of emails asking for private information, even if the messages look like they’re from their own company, Mackey said. Businesses should let employees know that reputable institutions don’t send out emails asking for passwords and account balances, he added. Executives with access to sensitive data might need extra training, Mackey said, adding that they can be among “the biggest offenders” when it comes to IT security. Just as SecureState often will try to protect sensitive data by isolating it, Hurricane Labs sometimes will have executives with high levels of access to data use a different part of the computer network than other employees, said Bill Mathews, owner and chief technology officer at the Independence-based IT security company. Doing so helps shelter sensitive data from breaches that could occur elsewhere at the company, and it allows IT departments to put more focus on protecting and monitoring the most important part of the network, Mathews said. But Mathews noted that the best technology can’t always make up for human error. Training is important, but companies need to make it fun if they want the message to stick, he said. Maybe turn it into a game or a contest, he added. “Absolutely nothing motivates people like free food and prizes,” he said. ■

Several months later, after consulting with pediatricians and other scientific professionals, Cik had a prototype mattress — waterproof and made with certified organic, nontoxic and significantly less flammable materials — that met his safety and health goals. And, he founded Naturepedic to produce and market baby mattresses that he felt were good enough for his grandchild and all newborns. “There’s nothing like reality hitting you in the face to get you motivated to start a business,” he said. “But I’m pretty entrepreneurial — had been in business for myself for decades — so I pretty much knew what I was getting into.” Of course, Cik also “got into” a mattress market that was ripe for growth. Naturepedic, explained David Brodwin, co-founder of the American Sustainable Business Council, of which Naturepedic is a member, wasn’t just going to be producing baby mattresses, “it was providing customers a product that was going to help them affirm their values and live them, too.”

Baby boom Naturepedic isn’t just Barry Cik’s baby. From the get-go, his sons, Jeff, who has a management and finance degree, and Jason, who has a systems engineering degree, have been full partners in the company. And, explained Cik, while he’s the company’s technical expert and its primary spokesman, they have been the major forces behind the company’s product line expansion and growth. “They have done all the research and planning for our children’s and adult mattresses, and our newest line of luxury adult mattresses, which has really taken off,” Cik said.

Naturepedic’s growth — driven by online sales, “which took off in 2005,” said Cik, and sales at about 400 retail outlets here and in Canada — has been nonstop. In 2004, Naturepedic was a threeperson company that sourced the organic and nontoxic materials that went into the baby mattresses and oversaw their production at a small mattress-making factory. In late 2005 they bought their own machines and equipment, and eventually hired 25 employees, many from Amish communities near Cleveland, and leased space in a building in Warrensville Heights. Cik said the move gave Naturepedic the room and human resources needed to expand production to include changing pads, bassinet padding, waterproof mattress toppers and more. As Naturepedic took over more and more space in the building, it also allowed the company to begin producing the organic and non-toxic children’s and adult mattresses that customers had been asking for pretty much from the get-go. Not surprisingly, though significantly more expensive than the baby mattresses, the new mattress lines sold extremely well. So well, said Cik, that by 2010, Naturepedic had outgrown its space in Warrensville Heights and moved to its current, 59,000-square-foot, 80employee factory and showroom in Chagrin Falls. “Those first couple of years, we pretty much just broke even,” Cik said. “But by 2005 we’d crossed the $1 million-in-sales line, and I know we crossed the $10 millionin-sales line last year (in 2013).”

Shooting for the stars Sales weren’t achieved with “ritzy-glitzy” marketing. Instead, Cik said the company focused on

education, and the impact that that sleeping on a mattress made with healthy materials has on health. Citing the company’s laser-focus on mattresses, its demand-driven growth, and the “organic” and “green” certification tags attached to each mattress, Mary McKinney, director of the Center for Green Industries and Sustainable Business Growth at Duquesne University, said she’s not surprised at the company’s story. “They are doing everything right,” she said. While Naturepedic started out making baby mattresses — and, stressed Cik, will always be making them — the company has become one of the two major players in the luxury-organic-mattresses-foradults universe. And, until last year, the company left the selling of its adult lines to high-end bed stores and the company’s website. Last November, testing the branding, store ownership and celebrity sales waters, Naturepedic quietly opened its first retail store in Beverly Hills, Calif. Due for its grand opening in March, the store will be focusing sales on its luxury series, which features organic cotton throughout and organic cotton-wrapped coils. The location for the first store was carefully chosen, said Cik, and that “care” has already begun paying off: sales have been strong, and several celebrities, including Jessica Alba, have bought Naturepedic products. Marketing-wise, celebrity sales are icing on the cake, says McKinney, because “they are an endorsement of the product by people are seen as role models.” If things go as planned, Naturepedic will open two more stores this year — in Dallas and Toronto — because, said Cik, “when you make something people want, they will buy it.” ■

GROWING PAINS ■ What was the top challenge Naturepedic faced in making the transition from startup to stand-alone store? Educating the public about the benefits of organic and non-toxic mattresses has always been Naturepedic’s No. 1 challenge. And doing it right means targeting two distinct audiences: those who are selling Naturepedic’s products and those who are buying them. ■ What is the most important growth step Naturepedic has taken? Leasing its own facility in Warrensville Heights, which meant purchasing machinery and equipment and the hiring and supervising of employees. ■ Naturepedic’s next big challenge? Ensuring that the luxury retail store in Beverly Hills, and those planned for launch in 2014, succeeds. The company’s continued focus on the education of sales staff and consumers — about the health and safety benefits of organic and nontoxic bedding — will go a long way to making that happen. — Eileen Beal

This year, Crain’s Cleveland Business is introducing a feature that will focus on small businesses and second-stage journeys. The stories will focus on smaller entities that have moved beyond — or are trying to move beyond — the startup phase. If you have a suggestion for a business or topic related to second-stage growth, contact Amy Ann Stoessel at

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FEBRUARY 10 - 16, 2014


Full-time employees 1-1-2014 Software products


Hyland Software Inc. 28500 Clemens Road, Westlake 44145 (440) 788-5000/



MRI Software LLC 28925 Fountain Parkway, Solon 44139 (800) 321-8770/



TMW Systems Inc. 6085 Parkland Blvd., Mayfield Heights 44124 (216) 831-6606/



Snap-on Business Solutions Inc. 4025 Kinross Lakes Parkway, Richfield 44286 (330) 659-1600/



OEConnection 4205 Highlander Parkway, Richfield 44286 (330) 523-1800/


D2DLink, CollisionLink, RepairLink, ConsumerLink


TurningPoint, Triton Data Collection System, ResponseWare, RemotePoll, PresenterWare, QuestionPoint, Insight 360


Turning Technologies 255 W. Federal St. , Youngstown 44503 (330) 746-3015/

OnBase, enterprise content management software suite

Name Address Rank Phone/Web site

Full-time employees 1-1-2014 Software products


Onosys, a LivingSocial Company 1220 W. Sixth St., Suite 200, Cleveland 44113 (216) 426-0000/


Onosys Online Ordering

MRI Commercial Management, MRI Residential Management, MRI Budgeting & Forecasting, MRI Workspeed



PowerLender Loan Origination & Processing System, PowerSeller Secondary Marketing System

TMWSuite, TL2000, TruckMate, Innovative, IDSC Netwise, IDSC ExpertFuel, TMT Fleet Maintenance, Appian DirectRoute

Associated Software Consultants Inc. 7251 Engle Road, Suite 400, Middleburg Heights 44130 (440) 826-1010/


Datacore Consulting LLC 5755 Granger Road, Suite 777, Independence 44131 (800) 244-4241/




DXY 1840 W. 28 St. , Cleveland 44113 (216) 373-6630/


Up Next! a fully customizable and interactive mobile software for conference venues and attendees


IQS Inc. 24950 Country Club Blvd., Suite 120, North Olmsted 44070 (440) 333-1344/


IQS Quality Management and Compliance Software


ID Networks Inc. 7720 Jefferson Road, Ashtabula 44004 (440) 992-0062/


Jail Management, Records Management, ImageNet, FingerRoll Livescans, CAD and Mobile Systems


Monarch Teaching Technology Inc. 20600 Chagrin Blvd., Suite 703, Shaker Heights 44122 (800) 593-1934/




Apteryx Inc. 313 S. High St., Suite 200, Akron 44308 (330) 376-0889/


XrayVision, XVlite, XrayVision DCV, XVWeb, DataGrabber


Specialized Business Software 6325 Cochran Road, Unit 1, Solon 44139 (440) 542-9145/


Docunym Document Imaging and Workflow


EasyLabel 6 Silver, EasyLabel 6 Gold, EasyLabel 6 Platinum, EasyLabel 6 Multi-User, EasyLabel 6 Net Print Server

Global EPC


BrandMuscle Inc. 1100 Superior Ave., Suite 500, Cleveland 44114 (216) 464-4342/


BrandBuilder, BrandPlanner, BrandWorkshop, BrandLibrary, Digital Asset Manager


Fleetmatics Group 31500 Bainbridge Road, Suite 1, Solon 44139 (877) 628-6087/


Fleetmatics, SageQuest, Connect2Field


Explorys Inc. 8501 Carnegie Ave., Suite 200, Cleveland 44106 (216) 767-4700/


Explorys Platform, EPM: Explore, EPM: Measure, EPM: Registry, EPM: Engage


Virtual Hold Technology LLC 3875 Embassy Parkway, Suite 350, Akron 44333 (800) 854-1815/


Conversation Bridge


CardinalCommerce Corp. 6119 Heisley Road, Mentor 44060 (877) 352-8444/




Tharo Systems Inc. 2866 Nationwide Parkway, Brunswick 44212 (330) 273-4408/


Foundation Software 17999 Foltz Industrial Parkway, Strongsville 44149 (800) 246-0800/



37 875 Westpoint Pkwy., Suite 510, Westlake 44145 (440) 827-2000/


Workflow EHR, Workflow PM


1 EDI Source Inc. 31875 Solon Road, Solon 44139 (440) 519-7800/


Offers a full suite of eletronic data interchange (EDI) software - EDI/HQ, EDI/PX, EDI/HQ - Access

Linestream Technologies 1468 W. Ninth St., Suite 100, Cleveland 44113 (216) 862-7874 /




TOA Technologies 3333 Richmond Road, Suite 420, Beachwood 44122 (216) 925-5950/



VeDiscovery LLC 1382 W. Ninth St., Suite 400, Cleveland 44113 (216) 241-3443/




MIM Software Inc. 25800 Science Park Drive, Suite 180, Cleveland 44122 (216) 455-0600/

40 69

Bearware Inc. 7160 Chagrin Road, Suite 210, Chagrin Falls 44023 (440) 893-2327/


Retail Distribution System, webTMS, Retail Payment System, Claims Management System, Inbound Management System


Software Answers Inc. 6770 W. Snowville Road, Suite 200, Brecksville 44141 (440) 526-0095/





Visual EstiTrack ERP, Visual Books Accounting, Visual WebTrack, iVET Mobile APP


FeneTech Inc. 260 Campus Drive, Aurora 44202 (330) 995-2830/

Henning Industrial Software Inc. 102 First St., Suite 211, Hudson 44236 (330) 650-4212/



Incom Integrated Computer Systems Inc. 7353 Austin Powder Drive, Glenwillow 44139 (440) 439-7000/


New Innovations Inc. 3540 Forest Lake Drive, Uniontown 44685 (330) 899-9954/


Membership Tracking Program, Benefits Tracking Program, LPA Tracker



LogicJunction Inc. 23950 Commerce Park Road, Beachwood 44122 (216) 292-5760/


LogicalEngine, Remote Agents


Main Sequence Technology Inc. 4420 Sherwin Road, Hamilton Hall, Willoughby 44094 (440) 946-5214/





Sundance Systems Inc. 8001 Sweet Valley Drive, Valley View 44125 (216) 328-8551/



Tribute Inc. 1696-F Georgetown Road, Hudson 44236 (330) 656-3006/


Data-Basics Inc. 9450 Midwest Ave., Cleveland 44125 (216) 663-5600/

Sam Pro Enterprise, TechAnywhere for Android



Point2 Property Manager


Point2 Property Manager 6001 E. Royalton Road, Suite 150, Broadview Heights 44147 (866) 602-9007/


Easy2 Technologies 1220 Huron Road E., 7th floor, Cleveland 44115 (216) 812-3200/


Content Publisher, Shopper Ratings, Shopper Video, Shopper Selectors and Shopper Q&A


Spede Technologies 24864 Detroit Road, Cleveland 44145 (440) 808-8888/


Spede Material Control System, Spede Line-side Labeling System


Segmint Inc. One Cascade Plaza, Suite 1800, Akron 44308 (888) 734-6468/


SegmintOne campaign management system, SegmintEngage, SegmintReach, SegmintConnect, SegmintExplore


Crowdentials 1621 Euclid Ave., Suite 2150, Cleveland 44115 (440) 829 2672/


Crowdentials Investor Verification Software


StreamLink Software 812 Huron Road, Suite 350, Cleveland 44115 (216) 377-5500 /


AmpliFund, BoardMax


InWare LLC 7100 E. Pleasant Valley Road, Suite LL1, Independence 44131 (216) 393-8198/


VALT, VALT Enterprise


Dakota Software 1375 Euclid Ave., Suite 500, Cleveland 44115 (216) 765-7100/


ProActivity Suite, Dakota Profiler, Dakota Auditor, Dakota Tracer, Dakota Scout, Dakota Metrics


PDP Tax Service 5510 Pearl Road, Suite 303, Parma 44129 (440) 842-1231/


Electro-1040, Electro-City, E2-W2, EZ Pay Stub


Pointe Blank Solutions Ltd. 7055 Engle Road, Suite 304, Middleburg Heights 44130 (440) 243-5100/


CasePointe, PropertyPointe, LivingPointe, ProjectPointe, DocuPointe


PreEmptive Solutions LLC 767 Beta Drive, Suite A, Mayfield Village 44143 (440) 443-7200/


Dotfuscator, DashO, Runtime Intelligence

ETAdirect software suite

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RESEARCHED BY Deborah W. Hillyer



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Metro: Winter has taken toll on towers continued from PAGE 5

About $40 million in new revenue was due to MetroHealth’s Medicaid waiver program, which expanded health insurance to roughly 28,000 uninsured people in the county. Boutros said the remaining $30 million was through “organic growth.” “What really ended up catapulting us was that we grew some programs, focused on containing casual overtime and involved the majority of the staff in looking for efficiencies,” he said. “That’s why the year ended so positive for us.”

Build, build, build MetroHealth’s loftiest task is how to remake its aging main campus on West 25th Street on Cleveland’s West Side. Boutros estimates that overhauling the campus could cost somewhere between $400 million and $500 million and would require a major fundraising push to come up with the needed money. Boutros’ predecessor, Mark Moran, unveiled a facilities master plan in early 2012, about a year before he stepped down. Other than the system’s critical care pavilion and its primary research building, Moran’s plans called for few of the health system’s structures to remain standing, including the patient towers on its main campus that were built in the 1970s. Without offering many details, Boutros said the plans designed under his watch likely will look different from Moran’s. He said preliminary plans would be unveiled by mid-year, and the community would have the opportunity to offer feedback. “We need to figure out what Cuyahoga County needs over the next 20 years,” Boutros said. “I think it’s going to look very different than in the past.”

When Boutros arrived at MetroHealth, he said he’d like to preserve the towers in some fashion, as they were “iconic” to the health system. However, the recent arctic blasts that hammered the region led to significant problems in the towers, which will cost the health system about $1 million for staffing and repairs. That figure doesn’t account for revenue losses that might have incurred due to an interruption in business. “We had significant issues with the towers during the first snow blast,” Boutros said. “It’s clear that the infrastructure is even older than I expected it to be. We have to do an analysis to see if anything is salvageable.” MetroHealth’s more immediate building project, however, is its new community health center slated to straddle Brecksville and Broadview Heights. The site is expected to be similar to MetroHealth’s $23 million outpost that opened in Middleburg Heights last summer. Boutros said work is expected to begin on the site this fall, with an official groundbreaking slated for late this year or early 2015. MetroHealth’s suburban conquest was devised before Boutros took the helm, though it has begun to pay dividends for the system. MetroHealth saw a 17% increase in outpatient visits in 2013, ballooning to 508,000 in 2013 from 435,000 in 2012, and the Middleburg Heights site is exceeding expectations. However, Boutros envisions MetroHealth extending its reach into the community in ways other than costly ambulatory sites. For instance, the health system recently opened a health clinic at MoundSTEM School in Cleveland’s Slavic Village neighborhood, and it plans to announce another in a local school within the next four to six weeks. Over the next two years,

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Boutros said he hopes to have 22 school clinics.

Embracing the community The Medicaid waiver, which MetroHealth dubbed its CarePlus program, no doubt helped the health system prop up its finances. But with the statewide expansion of Medicaid eligibility, it’s possible those enrolled in CarePlus could head to other providers, although that’s yet to be the case. The health system plans to deploy an enrollment van in early March to help people throughout Cuyahoga County enroll in the Medicaid program. MetroHealth patients also seem happier with the care they’re receiving. The percentage of patients who said they “would definitely recommend” the hospital increased to 70% in November 2013 from 59% in March 2013, according to the most recent data from the Centers for Medicare & Medicaid Services’ patient satisfaction surveys. “We are busy, busy, busy, and that’s wonderful,” said Julie Albers, president of the MetroHealth employee union. “People are coming and staying here.” Boutros was quick to note that the Medicaid expansion and the waiver program haven’t prevented the uninsured from flocking to MetroHealth. Last year, MetroHealth saw more than 38,000 uninsured patients. Before the waiver, MetroHealth saw about 48,000 uninsured patients a year. “Sometimes you get the fish you’re looking for and other times you get the fish you didn’t expect,” Boutros said. “We didn’t expect to get more uninsured, but that’s OK. It meets with our mission of creating a healthier you and a healthier community.” ■

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United: Airport director says other carriers are interested continued from PAGE 1

“Cleveland is now a much more inviting market than it was when United had a hub,” Smith said in a telephone interview last Friday, Feb. 7. “Because the hub is no longer here, we have a group of airlines that are more open and willing to have discussions with us around starting service, not saying, ‘Let’s wait and see what United says.’” The courtship game among airlines and airports is carried on discretely, so Smith is unwilling to name names. But, Smith said, “Carriers are now willing to have conversations about what their space needs are, which markets they want to consider and when they can start.” No airline expects airports to be monogamous, but a hub operator expects some fidelity and can react unpleasantly when a city messes with its business. In 2012, the city of Houston approved a plan by Southwest Airlines to build a new terminal for an international hub at the city’s William P. Hobby Airport, the city’s older, secondary airport. United, which operates a big hub at the city’s newer Bush International Airport, struck back. It immediately announced it would curtail sharply flights between Houston and many smaller cities and lay off as many as 1,300 employees. Smith said a similar situation occurred here last year when Delta Airlines added two daily nonstop flights to LaGuardia Airport in New York City, a busy route for United. “As significant announcement as that was for this community, we, the airport system, had to downplay it,” Smith said. “We were nervous about how the hub would receive it. “We were always very careful not to do anything to cause the hub to believe we were not committed to the hub,” he said. “That’s the way most cities would treat their hub. “We don’t have that situation any more,” he said. Hopkins has a two-person team, led by Todd Payne, chief of marketing and air service development, that talks regularly with airlines. It also has contracted with Seabury APG, a Reston, Va.-based airline consulting firm, to assist in attracting new flights. But in an industry where competitors have merged and the number of carriers is far fewer than a

petitor in the low-cost category, might enter the Cleveland market, in part because it bought a fleet of new aircraft “and it has to put them somewhere.” Snyder agreed about JetBlue. “Maybe with the reduction in service (by United) JetBlue might think less of the fortress United has in Cleveland.” he said. “But it’s not the huge opportunity (an airline) might hope for.”

Eyeing ‘blood in the water’


Hopkins International Airport director Ricky Smith says “Cleveland is now a much more inviting market than it was when United had a hub.” decade ago, Hopkins officials will be hard-pressed to replace the service that will be lost when United drops its hub here.

Airlines tighten up With the end in June of United’s hub operations at Hopkins, Cleveland will see the number of the airline’s daily departures fall 64%, to 72 from about 200 at present, as the city loses direct service to many midsize cities. Only one of the top 10 destinations of Northeast Ohio travelers — Phoenix — will lose direct, non-stop flights when United draws down its service levels. However, it’s unlikely Cleveland travelers will see a return of direct service to cities such as Dayton, Flint, Mich., or Rochester, N.Y., anytime before the Browns win their first Super Bowl. And observers say no amount of local marketing will add more than one or two nonstops to the roster. The math is simple. Not only have airlines consolidated operations in recent years, but they have worked hard to raise the number of passengers traveling on each plane — they call it load factor. A Hofstra Univer-

sity study found that load factors have increased from 70% in the aftermath of the Sept. 11, 2001, terrorist attacks to above 80% by 2012. As a result, from October 2012 to October 2013, the number of departures on U.S. airlines fell 1.8% even as the number of passengers traveling domestically rose 0.3%, according to U.S. Department of Transportation statistics. In other words, the trend is more passengers but fewer planes taking off. And hardest hit by the reductions in departures are the smaller, regional jets — United’s specialty at Hopkins. “Cleveland is over-served relative to local demand today” because of the volume of flights that don’t serve local travelers but instead largely connect regional travelers to the United system, said Seth Kaplan, managing editor of Airline Weekly, an online industry newsletter. “So, the idea that other airlines are going to rush in with all kinds of new service to replace what is being lost, that’s not generally what happens” when an airport loses its hub operation, Kaplan said.

Opportunity may knock Nonstop service to Phoenix, which United is dropping, is the most likely to be added by somebody, Kaplan said, perhaps Southwest Airlines. Southwest is a desirable, and likely, expansion candidate. It has a strong operation at Hopkins, it travels to attractive destinations and it’s a low-fare operator. But Smith, Cleveland’s airport system director, said he and his staff meet regularly or talk with dozens of carriers — large and small, likely and unlikely — about bringing service to Cleveland. “Quite frankly, that has picked up in the last week,” Smith said. “Todd Payne’s phone is pretty hot.” Brett Snyder, a former airline sales and marketing executive who blogs at, said Southwest might be too preoccupied with its plans to expand in Dallas, New York and Washington to spend much time growing its Cleveland operation, where it flies nonstop to Baltimore-Washington International, Chicago, Nashville and Las Vegas. Instead, Kaplan suggested that JetBlue Airlines, a Southwest com-

Both Kaplan and Snyder said other airlines, such as Spirit and Frontier, are in a new category called “ultra-low-cost carriers,” and they might be interested in Cleveland. They would not necessarily be the kind of carrier to add service to new markets. Rather, their strategy is to cut fares and take traffic on existing routes from so-called “legacy carriers” such as United that have higher operating costs and charge higher fares. Frontier began flying from Cleveland in January 2013, transferring its service to Denver from Akron-Canton Airport. In November, Frontier announced it would begin flying this Thursday, Feb. 13, from Hopkins to Trenton-Mercer Airport in Ewing, N.J., near Philadelphia, a route that defines ultra-low-cost carriers. The Denver-based airline also operates seasonal service to Cozumel, Mexico, and Punta Cana, Dominican Republic, from Hopkins in partnership with Apple Vacations. Miramar, Fla.-based Spirit Airlines currently does not serve Cleveland, but it’s growing quickly, Kaplan said. “They’ve come into a lot of markets and within a year have built up (market share) rapidly, despite competition,” he said. “If United abandons any of its Florida markets, Spirit, with its big hub in Ft. Lauderdale, would be a possibility.” Summing up the highly competitive state of the airline industry, Snyder said some of these carriers might take a chance on Cleveland after they assess where United is headed. “If airlines see weakness with what United is doing, that creates an opportunity for them to chip away and make United weaker,” he said. “Then United may end up reducing more. Airlines aren’t shy about seeing blood in the water.” ■

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FEBRUARY 10 - 16, 2014

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Mergers don’t thrill MetroHealth’s boss

The big story: Cleveland Mayor Frank Jack-

■ Some health care observers have floated the idea of MetroHealth — the taxpayersupported hospital system in Cuyahoga County — one day becoming an arm of a larger health system. But don’t hold your breath as long as Dr. Akram Boutros is at the helm of the enterprise. Boutros told Crain’s he’s not a fan of the rampant hospital consolidation happening across the country and, more specifically, Northeast Ohio. “I believe hospitals can work together in lots of different ways without having to be acquired,” Boutros said. “I think it’s an easy solution for immediate problems. I don’t think a long-term strategy of what’s best for the community is to have fewer hospitals and more consolidation.” Northeast Ohio could be considered consolidation country. University Hospitals recently took over Parma Community General Hospital and EMH Healthcare in Elyria and hopes to do the same with Robinson Memorial in Ravenna. The Cleveland Clinic is eyeing Akron General, which is looking to be acquired. Also, Summa Health System last year sold a minority stake in itself to HealthSpan Partners, an auxiliary organization of Catholic Health Partners in Cincinnati. — Timothy Magaw

son wants to involve Ohio Attorney General Mike DeWine in the situation that finds the city on the losing end of an effort to keep a United Airlines hub operation at Cleveland Hopkins International Airport. Jackson has asked DeWine to review the agreement between the state and the airline that was signed in 2010 when United was planning to merge with Continental Airlines, which had operated a hub at Hopkins for decades. The mayor said the agreement between the state of Ohio and United guaranteed hublevel service at Hopkins for five years and helped the two airlines through the federal government’s approval of the merger. See story, Page One, and opinion pieces, page eight.

Hoop dreams:

The Cleveland Cavaliers, floundering well out of contention for a playoff spot that was this year’s main goal of majority owner Dan Gilbert, fired general manager Chris Grant. David Griffin, the team’s vice president of basketball operations, was named acting GM. Gilbert said the team has “severely underperformed against expectations.” He vowed, “We will continue to turn over every stone and explore every possible opportunity for improvement to shift the momentum of our franchise in the right direction.”

Tender feelings: The Great American Insurance Co. subsidiary of Cincinnati-based insurance holding company American Financial Group Inc. launched a tender offer to acquire all the shares it doesn’t already own of Richfieldbased insurance company National Interstate Corp. for $28 a share. In a regulatory filing, American Financial said there were 19.7 million National Interstate shares outstanding, of which 10.2 million are owned by subsidiaries of the Cincinnati company. The offer to buy about 9.5 million National Interstate shares is valued at nearly $267 million.

Making history: Hiram College named Lori Varlotta, a senior vice president at California State University, Sacramento, as its 22nd president. The Pittsburgh native will become the college’s first female president. She will succeed Tom Chema, who will retire after 11 years at the helm of the small, private college in Portage County. Varlotta will start in her new role in early August. Party on: The Cleveland Foundation continues to shower the Greater Cleveland community with gifts in celebration of the foundation’s 100th birthday. It has created “North Coast Harbor Weekend” and will offer free admission to the Great Lakes Science Center on Saturday, Feb. 22, and the Rock and Roll Hall of Fame & Museum on Sunday, Feb. 23. It will be the first time the Rock Hall has opened its doors for free on a weekend. It’s also the first time the science center has opened its doors on a weekend for free admission and Omnimax films.

Giving them Liberty in Wooster, too

■ Dennis J. Roche, a former president and CEO of Positively Cleveland, the area’s con-

■ Liberty Bank N.A. had made a couple loans in this marketplace to its south, but locals told bank officials the Beachwood-based institution wouldn’t grow in Holmes and Wayne counties without a presence there. “If you want to be successful there, you’ve got to be a member of the community,” president and CEO Bill Valerian said he and his bankers were told. So, this Tuesday, Feb. 11, Liberty Bank will open its first loan production office in



Dorsey & Co. positively glad to add Dennis Roche

Excerpts from recent blog entries on

Oh, we have to pay?

On second thought …: For the third time in four years, Hyland Software is taking on debt to give money to its owners, who might not be so interested in selling the Westlake-based company after all. Hyland plans to pay a $95 million dividend to its shareholders with the help of a new $435 million loan, most of which will be used to refinance an older loan, according to a document from Moody’s Investors Service. The deal could suggest that the private equity firm that owns most of Hyland’s shares isn’t planning to sell the company anytime soon. The Wall Street Journal reported that the firm, Thoma Bravo, went forward with the so-called “dividend recap” deal instead of pursuing a rumored plan to sell the content management software company.

vention and visitors’ bureau, has joined Dorsey & Co., a consulting firm in Cleveland that specializes in competitiveness and marketing strategies. Roche left Positively Cleveland in late 2010 when the duties of running that organization and the Greater Cleveland Sports Commission were brought under a single chief executive, the sports commission’s Roche David Gilbert. At Dorsey & Co., Roche will hold the title of senior associate. “A group of our senior associates and I have held top marketing management roles in travel and lodging; now Dennis’ successes in destination marketing and economic development in particular bring a fresh perspective and valuable expertise to our skills in this area in particular,” Dorsey & Co. president Julius C. Dorsey Jr. said. — Mark Dodosh

COMPANY: GE Lighting, East Cleveland PRODUCT: LightGrid Outdoor Wireless Control System GE Lighting says its new control system helps municipalities reduce their energy use and manage street light more efficiently. Using GE Lighting’s central management software, the LightGrid Outdoor Wireless Control System “can report energy usage and other operational data of street lights to a central database,” according to the company. A web-based interface linked to the lighting controls allows authorized users and owners to visualize remotely real-time performance of their outdoor lighting system. “Further software capabilities include scheduling, customized reporting, grouping and user access level management,” according to GE Lighting. Schedules are stored at the street lighting fixture, “providing continued performance even during network disruptions.” The LightGrid technology has GPS in the lighting controls, “so municipalities can instantly identify usage and performance of street lights in specific locations,” the company says. “Municipalities can activate more precise ‘on/off’ and street light dimming schedules, particularly in low-traffic and other areas during the night.” For information, visit:

Send information about new products to managing editor Scott Suttell at

■ Around one in five people who picked health insurance policies on the state and federal exchanges last year haven’t paid their first month’s premiums, reported, although Cleveland-based Medical Mutual of Ohio seems to be among those bucking the trend. “Some 2.1 million people signed up for a plan in time for their coverage to start Jan. 1, according to the Obama administration,” according to the website. “But with the payment deadlines stretching until January 31 at the latest, anywhere between 12% and 30% of those folks still haven’t paid up, insurers say.” Most consumers were given until the middle or the end of January to pay their first premium, a necessary step to actually activating enrollment. Exchange officials and insurers “repeatedly stressed the importance of sending in that first payment, with some following up with the slackers by phone or letter,” reported. Only about 70% of those who signed up for Aetna plans sent in payments by its midmonth deadline, according to the story, but 88% of Medical Mutual of Ohio’s 6,500 applicants paid their bill by the Jan. 15 cutoff. That was more than Medical Mutual had projected, the website noted.

Value in diversity ■ Charts that were reproduced in’s analysis of manufacturing job losses in seven Rust Belt metros, including Cleveland, reinforce just how devastating industrial decline has been for Detroit. From 2000 to 2010, for instance, manufacturing jobs in Detroit fell by 52.4%, to

Wooster, staffed by John A. Holland III, a 25year community leader in the counties. Valerian said the region is home to “the kind of businesses we make loans to.” He cited businesses with up to $50 million in sales and the area’s strong professional services community, through which Liberty Bank connects with businesses. The Wooster office will reside at Liberty Commons at 146 Liberty St., Suite 190. Besides its headquarters in Beachwood, Liberty Bank has branches in Solon and Twinsburg. Expanding south keeps the bank’s salespeople from “crawling all over each other,” in a state where there are “not a lot of new areas where businesses are popping up,” Valerian said. — Michelle Park Lazette

In need of free marketing help abroad? Check this out ■ Cleveland State’s Monte Ahuja College of Business is looking for local companies that can benefit from free international marketing research conducted in London this spring. Cleveland State students will lead the marketing efforts, which likely will include visiting business libraries, contacting company officials, visiting competitors and conducting interviews. The effort is part of an international marketing and business research class led by Kimberly Ruggeri, a lecturer in the marketing department. Last year, students provided research to three Cleveland companies looking to expand into the London market. Those interested can contact Ruggeri at or 216-687-3670. — Timothy Magaw

186,000 from 391,000, according to data produced for a coming issue of Urban Studies by the economics scholar John F. McDonald. Cleveland’s manufacturing-job loss in the same timeframe was bad — 40.8%, to 116,000 jobs from 196,000 jobs — but not at the level of Detroit. (The average manufacturing-job loss of the six metros other than Detroit — Buffalo, Chicago, Cleveland, Milwaukee, Pittsburgh and St. Louis — was 38%.) “Compounding the problem was the fact that Detroit placed so many of its employment eggs in the manufacturing basket,” reported. “The mean total job loss for the six other cities in the 2000-2010 period was 6.5 percent. Detroit’s job total, meanwhile, plummeted 21 percent — a 15point disparity, and a sign of the city’s poorly diversified economy.”

Read a Good Book lately? ■ Residents of Ohio’s big cities are about average in their levels of “Bible-mindedness,” according to research from the American Bible Society. Dayton (No. 37) Cincinnati (No. 45); Columbus (No. 47); Cleveland/Akron/Canton (No. 50) fell pretty close to the middle of 100 U.S. cities evaluated. More than 46,000 adults were asked in telephone and online surveys if they read the Bible within a past week of being surveyed and if they agreed strongly in the Bible’s accuracy. These two components were classified as “Bible-mindedness.” According to the society, “Not surprisingly, many cities in the East Coast continued to rank as the least Bible-minded in 2013. Among them: Providence, R.I.; Albany and Buffalo, N.Y.; Boston; and Portland, Maine.” The study found Chattanooga, Tenn., to be the top city for “Bible-mindedness.”



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Crain's Cleveland Business  

February 10 - 16, 2014 issue

Crain's Cleveland Business  

February 10 - 16, 2014 issue