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$2.00/APRIL 13 - 19, 2015

‘Small cells’ are boosting cellular coverage for many in Northeast Ohio — P. 4 Ohio clay shooting enthusiasts say the activity is like golf — only better — P. 5

STRONG DOLLAR PUTS A STRAIN ON BOTTOM LINE By Rachel Abbey McCafferty The U.S. dollar has been growing increasingly strong in recent months, thanks to a growing national economy and falling oil prices. But this has strained manufacturers who are looking to sell their suddenly more costly products overseas or compete with foreign companies on bids. The strong dollar has been making national headlines and affecting companies locally, like Ferro Corp. in Mayfield Heights, Chart Industries Inc. in Garfield Heights and A. Schulman Inc. in Fairlawn, all of which

have reported that the foreign currency exchange rate has affected their outlooks for 2015. Ferro in February set its earnings per share guidance for fiscal year 2015 at $0.85 to $0.90, noting an expected negative impact of $0.12 to $0.14 from foreign currency rates. A. Schulman reduced its full-year guidance in March to $2.50 to $2.55 per diluted share from $2.60 to $2.65, “reflecting the impact of the continuing steep decline of the euro and other foreign currencies,” according to a See DOLLAR, page 22

Budish envisions different approach for county By JAY MILLER jmiller@crain.com

Building a stronger, more capable workforce and helping Cuyahoga County businesses, especially the smaller ones, raise money for growth — those are likely to be the key elements of the economic development policy Cuyahoga County Executive Armond Budish will lay out this Wednesday, April 15, during his first State of the County address. They are the two themes Budish is focusing on in part because they were the issues most often brought up by the businesspeople on his “listening tour.” Budish over the last several months met with more than 150 people who own or operate large and small businesses, or who are part of organizations that assist businesses. “The conversations were good,” Budish said during an hour-long interview from his eighth-floor office in the new county headquarters building. “The

Transition was rocky from the start By JAY MILLER jmiller@crain.com

While the new Cuyahoga County executive is getting kudos for his policy planning, Armond Budish’s personnel management over the transition has been rocky. And while it’s not clear that government operations have suffered, it has led to talented people wondering about job security and, in some cases, deciding to leave county government before the hammer had a chance to fall.

The Budish hiring process took a particularly hard hit in recent weeks, after the Northeast Ohio Media Group reported a failure to catch résumé errors and verify the income of Marcia McCoy, who the county was hiring to be its director of public benefits and external relations. McCoy was fired last week. Beyond that specific lapse, five months after his Nov. 4 victory, Budish’s leadership team is still not completely in place. That lack of certainty has caused grumbling, See TRANSITION, page 20

See BUDISH, page 21

ALSO INSIDE: NEWSPAPER

74470 83781 0

general overall themes that came out over and over again were, one, the need for capital, and the other was workforce.” Those observations will come as no surprise to most businesspeople and they were not really a surprise to Budish. His years running a law firm made Budish a small business operator, and his eight years as a state representative gave the estate and elder law specialist some familiarity with public sector economic development. But this is the first time he’s been the executive in charge of designing a strategy to help businesses create jobs. “What impressed me was that he was very interested, very open, to hearing what we all were saying,” recalled accountant Rion Safier. “Rather than talking to us, he was listening to us. He was soliciting input and soliciting it hard.” Safier is chairman of the board of the Council of Smaller Enterprises, and he and a group of COSE

MIDDLE MARKET Growing companies often need to bulk up their leadership teams ■ Pages 13-18 PLUS: ADVISER ■ TAX TIPS ■ ADVISORY BOARDS ■ & MORE

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Small Business Matters i Want more information and resources on this week's topics, ideas and events? Go to www.cose.org/smallbizmatters.

PRESENTED BY

52 TIPS FOR YOUR BUSINESS

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CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

APRIL 13 - 19, 2015

‘Small cells’ are one of the next big things for carriers

SOLD 8036 BAVARIA ROAD TWINSBURG, OHIO

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Volume 36, Number 15 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright © 2015 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: 212-210-0750 Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan, 48207-9911, or email to customerservice@crainscleveland.com, or call 877-824-9373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax 313-446-6777.

You see a street light. Verizon Wireless sees a mini cell tower. Over the past 12 months, Verizon has equipped about 30 street lights and utility poles in downtown Cleveland with “small cells” — a technology that is helping wireless carriers pump more data into places where lots of people are trying to get it. Thus, Verizon and other carriers are putting up small cells near popular urban destinations. For instance, Verizon now has small cells near FirstEnergy Stadium, the Rock and Roll Hall of Fame and Museum and the State Theatre on Euclid Avenue. But Verizon also has another 30 some small cells spread out across nine Cleveland suburbs, boosting coverage near shopping centers, business parks and apartment buildings. You probably haven’t noticed them. From the outside, small cells look just like boxes attached to poles, or sometimes buildings. But those boxes are becoming much more important to wireless carriers. Last year, Verizon started “aggressively building out our small cells throughout the country,” according to Verizon spokeswoman Laura Merritt. In March, the company announced that it would invest about $500 million to put up small cells and other technologies that allow it to improve service in hard-to-reach areas (like downtowns with tall buildings) and locations where lots of people are using mobile devices to access the Internet. Sprint, meanwhile, wouldn’t tell Crain’s much about its small cell plans, but New York-based Macquarie Capital estimates that Sprint could also spend up to $500 million putting up small cells this year throughout the country, when you combine the cost of equipment and labor. A research note the firm released in January cited conversations with three small cell vendors working with Sprint. It’s not a gold rush, however. TMobile has no “immediate plans to deploy small cell technology in the Cleveland market,” according to a statement from spokesman Scott Goldberg. But the company did expand local coverage in December, when it started offering in Cleveland so-called low-band LTE coverage, which uses lower frequencies that travel farther and penetrate buildings more effectively, according to T-Mobile. And while AT&T originally planned to put up 40,000 small cells by the end of 2015, it scaled back those plans after it acquired Leap Wireless in March 2014. That deal gave AT&T access to Leap’s cell towers and its radio spectrum. However, small cells “remain a key part of our advanced network toolset,” according to a written

CONTRIBUTED PHOTO

Verizon Wireless has placed “small cells” on about 30 street lights and utility poles in downtown Cleveland. statement AT&T provided to other media outlets last month.

Small cells, big future Thus, the number of small cells deployed in the United States should jump from roughly 40,000 to 52,000 over the course of 2015 — a 30% increase, according to a separate report Macquarie released in January. Many of the old ones were located indoors. Lately, however, carriers have been putting them up outside, now that they’ve figured out how to prevent their signals from interfering with each other. A few other factors are driving their popularity, judging by a recent conference call between Verizon executives and stock analysts. Small cells are becoming “an increasingly cost-effective way to add capacity,” executive vice president Tony Melone said during the Feb. 17 call. He gave a few other reasons, too: Fiber optic cables needed to connect small cells to the rest of the network are becoming more readily available; the cost of acquiring traditional spectrum is rising; and “municipalities have generally become much more receptive to the technology.” The Federal Communications Commission may have had something to do with that last one. In Oc-

tober, the FCC voted to streamline the process that carriers go through to install small cells and other relatively unobtrusive wireless equipment, like the distributed antenna systems that make it easier to upload Facebook photos during soldout concerts and sporting events. Verizon already has distributed antenna systems at Cleveland’s three big-league sports venues, as well as the new Cleveland Convention Center. The company’s small cells, however, will serve people when they leave those venues and head out on the town. Small cells won’t replace traditional cell towers, according to Merritt, of Verizon. However, Jeffrey Thompson expects that they’ll play an even bigger role in Verizon’s future. He’s the CEO of Towerstream Corp. of Middletown, R.I. The Internet services company is working with Verizon to deploy its small cell network in the markets Towerstream serves (none are in Ohio). During a conference call with stock analysts on March 12, Thompson said he believes that the carrier will spend more than $500 million on small cells in future years. “To be specific, Verizon expects its investments in macro towers to decrease over time as spending priorities shift to small cell and inbuilding coverage,” he said.

CORRECTION ■ Concept images of The Foundry training center for rowers planned for the Flats should have been credited to Victor Sergent Designs.

Incorrect information was provided for the renderings that appeared in the Feb. 16 issue.

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APRIL 13 - 19, 2015

WWW.CRAINSCLEVELAND.COM

CRAIN’S CLEVELAND BUSINESS

Drilling industry reaches new low Oil and gas market has been hurt by falling prices, but one recent number is very telling By DAN SHINGLER dshingler@crain.com

Shawn Spindel. “They entertain like any other insurance company and they give (their associates) an option … they can go and golf, they can fish or they can shoot clays. We’re seeing a lot of guys shooting clays instead of golfing,” Spindel said. Corporate memberships and outings have been on a steady rise at Hill ’n Dale for about the last five to eight years, Spindel said, and the growth seems to be continuing. “It’s all different groups,” Spindel said. “There are a lot of contractors that come out, a lot of banks — investment people come out and

The week that ended April 4 was, if not a landmark, at least a mile marker for Ohio’s oil and gas industry. For the first time since some can remember, and since the state’s shale drilling boom began about five years ago, the Ohio Department of Natural Resources issued no new permits for wells to be drilled. Not a single one for the Utica shale or the Marcellus. Considering the state issued almost 2,000 permits in the last three years — a pace of more than 12 new permits each week that was only quickening a year ago — the complete lack of activity was a bit of a surprise even to industry insiders. “I was surprised,” concedes Shawn Bennett, executive vice president and spokesman for the Ohio Oil and Gas Association. That said, Bennett was only surprised at the absolute nature of the drop-off. The fact that drilling has declined in the state shouldn’t be a surprise to anyone who really understands the industry, he says, and it has certainly not blindsided Bennett. He watches the price that Ohio drillers get for their oil and gas, which is less than drillers get in other parts of the country. And prices nationally have only been dropping at the same time. Those prices have been harbingers for the slowdown that’s now taking place. “This is a perfect example of what happens when commodity prices in the industry tank. It’s simple economics — when prices are low, why drill?” Bennett said. Besides, he adds, most drillers active in the Buckeye State still have more wells and permits than they have good connections to pipelines that can gather their gas and get it out of the area. Often, they are contractually obligated to drill on parcels of land that already have been permitted — and they aren’t in a huge hurry to permit new well locations when prices for their products are at or near historic low points the way they are now. Another indicator that Bennett and other industry observers watch also foretold the present slowdown in activity. The number of drilling rigs in Ohio —rigs that are typically leased by drillers, at great expense — has been falling rapidly. There were

See MARK, page 19

See DRILLING, page 22

U.S. SPORTSMEN’S ALLIANCE PHOTOS

Sporting clays shooting is like “golf with a shotgun,” said one of its enthusiasts.

ACTIVITY HITTING THE MARK Clay shooting is viewed by many of its backers as an alternative to swinging the golf clubs By DAN SHINGLER dshingler@crain.com

“There’s no bang in golf” — or at least that’s what they say in the sporting clays game. But that’s just one reason more executives, business owners and professionals are picking up a shotgun to unwind, network or even raise money for a favorite charity. If you’ve been invited to go clay shooting more often than to play golf lately, you’re not alone. “I am a golfer. But this is how I tend to entertain people outdoors — with sporting clays shooting. I often describe it as golf with a shotgun,” said Ronald Ambrogio, Ohio regional president for BNY Mellon Wealth Management in Cleveland and an avid sporting clays shooter. Sporting clays shares a few things with golf. Instead of holes, there are stations — usually between 10 and 15 on each course. At each station, shooters must contend with one or two targets, which are brightly colored, fragile clay disks that are thrown from machines called traps. The shooter is told ahead of time how many disks are going to be thrown and from where — then it’s up to him or her to figure out how to hit them.

You only get two shotgun shells per station, so marksmanship is a must. Of course, unlike in golf, the highest score wins in sporting clays. Also, it does not take that long to enjoy some success at sporting clays, even though it might take years to become an expert. “There are two distinct differences that come into play between golf and sporting clays,” said Daniel Creekmur, president of Columbia Gas of Ohio and also an avid sporting clays shooter. “A lot of people aren’t good at golf. It’s easier, if you’re comfortable with a gun, to learn to shoot clays. And golf can take six hours, whereas you can shoot a round of clays in an hour or two … it’s just a different kind of outing.” Unlike the shotgun sport of trap shooting, in which the best shooters regularly hit 100 out of 100 targets, even the best shooters will miss a sporting clay or two as they try to shoot amid trees and from extremely varied angles and distances. Sporting clays and golf share some other traits, too. Shooters often get from one station to the next in golf carts, especially at nicer clubs like Hill ’n Dale in Medina or the vaunted Black Dog Farm owned

by Columbus billionaire Les Wexner. But it’s the social aspect that might make sporting clays the most like — and the most competitive — with golf. And that’s why people and organizations are drawn to it.

‘It’s about breaking the clays’ At Hill ’n Dale, for instance, about 125 of the club’s 650 members are corporate members, ranging from small family businesses to the big Westfield Insurance Company in Medina County, which regularly holds events at the club, says Hill ’n Dale general manager

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Everything about Akron Children’s Hospital is unusual, and that certainly doesn’t seem to be a bad thing. The hospital’s inpatient volume is growing at a steady clip, unlike those of most of the adult-centric hospitals in Northeast Ohio. Plus, it appears to play nice among other local providers, acting almost as a Switzerland of sorts in the region’s aggressively competitive health care landscape. Also, it’s shown no interest in being acquired or selling a stake of its enterprise to a larger health system, unlike the other hospitals in Akron. Unorthodox, sure, but it’s proven to be a successful model. This year, the hospital will celebrate its 125th anniversary, but Akron Children’s isn’t using the milestone as a time for reflection. Instead, the hospital is only looking to get bigger and better as it polishes off a $200 million expansion effort and deepens its roots elsewhere in the region. Much of that drive can be chalked up to its CEO of 36 years, William Considine, who jokes that he came as a patient in 1979 and is still trying to pay the bill. When Considine arrived, the enterprise was roughly a $30 million operation with about 900 employees. Today, Akron Children’s, which describes itself as a fully integrated health care delivery system, employs roughly 5,000 and boasts about $750 million in operating revenue. According to recent data from the American Hospital Association, Akron Children’s is the fastest-growing children’s hospital in the country. “We have a winning formula,” said Considine, now 67 years old. “We’re very focused on our roots and our promise to treat every child as if it’s our own.” Akron Children’s $200 million expansion, which has been dubbed the “Building on the Promise” project, is its loftiest physical investment in more than two decades. The centerpiece of the project, which will open next month, will be a new critical care tower. The tower — named the Kay Jewelers Pavilion, in recognition of a $10 million gift from Akron-based Ster-

ling Jewelers — will include a neonatal intensive care unit with private rooms, a new emergency department, outpatient surgical suites and a dedicated space for several of the hospital’s pediatric subspecialty programs. The whole project, Considine said, was “designed through the eyes of a child.”

Time to grow up Akron Children’s, too, isn’t building for the sake of building. The hospital’s current emergency room was built to accommodate 44,000 visits a year but today sees about 65,000 visits annually. Also, a few years ago, the hospital had to seek permission more than 90 times from the state to care for patients beyond its licensed bed count for its neonatal intensive care unit. The new tower will include a 100-bed NICU, opposed to the current 59-bed space. “I’ll take good people and a family-centered care philosophy any day over bricks and mortar,” Considine said. “But eventually, we have to support that care with the appropriate facilities. Our volume growth over the last decade has been over the top. Quite honestly, we needed to make another investment in our physical plant.” Akron Children’s isn’t the only children’s hospital making a lofty investment in its plant to accommodate growing patient volumes. Cincinnati Children’s Hospital is in

the midst of a $162 million expansion at its Liberty Township facility. A few years ago, Nationwide Children’s in Columbus polished off a $783 million upgrade. Demographics tend to be working in favor of children’s hospitals, even in areas with slow-growing populations, as the number of children in the U.S. is on the rise. Today, there are about 74.3 million children in the U.S. — a figure that, in a decade, is expected to rise to 78.2 million, according to U.S. Census Bureau projections. Also, given that children’s health care is more regionalized, there tends to be less direct competition among hospitals. As such, Akron Children’s finances appear on stable ground. Last year, the health system posted a 10% operating margin — an incredible number in today’s health care industry. That figure was buoyed by unexpected payouts from Medicare for treating adults in the hospital’s burn unit. But even without those funds, Akron Children’s would have posted a 6% margin, which is still well beyond the 3% for which it had budgeted. Still, Akron Children’s does have some competitors in the region given both Cleveland Clinic and University Hospitals have robust pediatric programs. Complicating matters is the fact that both the Clinic and UH have made sizable investments in the Akron area. See HOSPITAL, page 7

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GCP, Cleveland Foundation providing pathway for workers By TIMOTHY MAGAW tmagaw@crain.com The Greater Cleveland Partnership, the regional chamber of commerce, is launching a new initiative aimed at solving one of its members’ biggest gripes: finding qualified workers. That effort — dubbed Pathway Partners — got a major boost recently through a $125,000 grant from the Cleveland Foundation, which also has taken a greater interest in workforce development over the last year after commissioning a study from a national consulting firm, FutureWorks, which shed light on Cleveland’s dire skills gap. In the most basic sense, GCP said Pathway Partners will serve as a onestop physical and virtual destination to connect local students with internships and other learning experiences, and it will serve as a resource to help employers develop these sorts of opportunities. “We really see ourselves as the ideal location to bring this all together because of our deep reach into the

HOSPITAL continued from page 6

Akron Children’s operates NICUs, for instance, at Akron General and Summa’s main outposts. The Clinic recently bought a stake in Akron General, and UH has quietly gobbled up physician practices in the area. As for the Clinic, Considine said he’s received assurances from the Clinic that it doesn’t plan to end his organization’s relationship with Akron General. In fact, the Clinic and Akron Children’s recently signed an agreement to bring together certain elements of the two institution’s heart care programs. “I do get the sense that the adult systems have a difficult time understanding our independence,” Considine said. “Hospitals in the past have asked for exclusivity. We continue to say no to that … Is it a little more difficult to say that today? Probably, but there’s value to collaboration.”

business community,” said Shana Marbury, GCP’s general counsel and vice president of strategic initiatives and research. “A lot of work in this area is going on in the community, but it’s not at all connected. We see ourselves as the connector or clearinghouse.” The foundation’s study found that more than three-quarters of all two-year degrees and certificates granted by community colleges in the Greater Cleveland area are in three subjects: general studies, health programs and business and management. That figure doesn’t bode well for in-demand fields, such as information technology and advanced manufacturing. Because of this disconnect, founda-

tion officials said the business community needed to make a stronger push in this area. Internship and mentoring programs, of course, are nothing new to Greater Cleveland. What makes this effort so promising, its organizers say, is that the business community’s strongest voice — GCP — is taking such a prominent role. “We can’t stress enough how important we think it is that GCP has decided to take on this work and this role,” said Helen Williams, the foundation’s program director for education. “It was the critical missing piece.” She added, “The business community as a member of the Cleveland community has to organize it-

partnership.com. “This is not a one-off, one-school at a time program,” said Shilpa Kedar, the foundation’s program director for economic development. “It’s more systemic. True2U is about institutionalizing career awareness.” The city’s school district, with the help of Pathway Partners, is also in the midst of redesigning the curriculum at its five career academies to focus more on job skills. The redesign will use framework developed by the Ford Next Generation Learning initiative, a growing educational movement launched by the automaker to bring together educators and the business community.

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Swan song? Not yet While Considine would point to his staff and the community for the fuel behind Akron Children’s success, it’d be difficult not to attribute much of it to him given his lengthy tenure as the hospital’s CEO. “Bill Considine is one of the guys who has made it OK to collaborate and work together to solve complex problems in the health care system,” said Nick Lashutka, president of the Ohio Children’s Hospital Association, the board of which Considine now chairs.In 2009, Considine told Crain’s that he would retire within five years at most. And given that he’s putting the finishing touches on a transformational project, it seems like now would be as perfect a time to retire as any. And while he said a succession plan is being put in place and there are a handful of internal candidates that would be a good fit for his role, he’s not planning to go anywhere soon. “Being around this positive energy and this alignment hasn’t drained my spirit at all,” Considine said. “It’s added to it. We all know what it’s like to be around negative energy. It ages you. I feel young and inspired still.”

self in a way so that it can add value and ensure our education system is aligned with workforce needs.” A key part of Pathway Partners will be a career exploration initiative called True2U, which is a partnership with the Cleveland Metropolitan School District, the foundation’s MyCom youth development program and other community partners. As part of that program, GCP plans to recruit 200 business and community members to serve as mentors for eighth-graders within the city’s public school system. Within three years, the program hopes to have 600 mentors on board. Interested volunteers can sign up on GCP’s website, www.gc-

REGISTRATION To register, please contact MEGAN PAJAKOWSKI at mpajakowski@beneschlaw.com. We will be holding a webinar to introduce and preview this topic April 28, 2015 11:00 a.m. – 12:00 p.m. Please register at www.crainscleveland.com/webinars.

1:00 p.m.: Registration 1:30 p.m.: Program 5:45 p.m.: Cocktails, networking, optional Museum touring This half-day seminar will alert you to 3D Printing technology’s game-changing opportunities and challenges: • New, complex products manufactured in one build with less waste by-product • Increased supply chain efficiency, global digital factories • Labor markets transformed • Manufacture over the Internet and print to order • Print at home, sell/share over the Internet • Intellectual property and product liability issues • Challenges for spare parts businesses On October 1, 1982, Billy Joel’s 52nd Street was the first commercially-released CD album. Beginning in June 1999, Napster allowed people to easily share MP3 files with each other. Digitization profoundly changed the music industry. Now digitization is changing the way we make and sell almost everything else. To paraphrase Robert Johnson, we’re standing at the crossroads.

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JENNIFER LAWTON CEO of MakerBot, the manufacturer of the leading desktop 3D printer BRETT CONNER Associate Professor of Mechanical & Industrial Engineering and Director of the Advanced Manufacturing Workforce Initiatives at Youngstown State University

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ICI Metals is ‘playing with the big boys’ By DAN SHINGLER dshingler@crain.com

Economic developers are constantly trying to promote the growth of specialty, high-value manufacturing in the region, such as the making of medical devices, aerospace parts or parts made of special metals for the energy industry. And that’s just fine with Derek Kauffman, because their successes are helping to drive his business at Strongsville-based ICI Metals. It’s also partly why his company has been adding both people and space. Since moving to its current location in 2010, the company has added 17 employees, bringing its total to 27. And just this year, in January, it added another 21,000 square feet of warehouse space, bringing its total footprint under roof to about 82,000 square feet. The growth of industries that rely on ICI’s specialty alloy steels, stainless steel and aluminum stock has been a big driver of the company’s growth. But ICI has done much to secure the business of those customers, Kauffman said.

Originally, ICI was not able to order in large enough quantities to purchase its metals directly from the mills, putting it at a cost disadvantage to larger service centers that could buy from the mills at lower prices. “We just started pushing more aluminum, a lot of specialty metals; in our distribution game, there are a

“And bang, we’re now playing with the big boys because now we can buy from the mill, too.” – Derek Kauffman quality assurance and sales manager, ICI Metals lot of big distributors. We are not a big distributor, we’re specialists,” said Kauffman. “But we’re small, and initially we had no mill presence — we couldn’t buy directly from the (aluminum and steel) mills.” But, by integrating itself into its customers’ inventory-control systems, ICI has been able to change that, Kauffman said. “We say: ‘You know what, tell us

what kind of container you want to use, and we’ll take care of your metal. We’ll bring it in, cut it to the size you want, pack it to the size you want and all you have to do is take it to your CNC machines.’ ” The company was able to do that for five years, before the recent expansion, without ever being late with a delivery. But it had to constantly move too much material around. Now, its own inventory is more orderly and accessible, Kauffman said. As a result of its own performance, ICI has been able to get access to its customers’ computerized inventory control systems, enabling it to not only better react to customer shortages of material before stocks run out, but also to see ahead in terms of its customers’ needs. That has put the company on equal footing, even with some competitors that are much larger. “Now, we know how much they’re going to use — so we can go to the mills and say, ‘OK, here’s what I need for a quarter or a year.’ And bang, we’re now playing with the big boys because now we can buy from the mill, too,” Kauffman said.

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GOING PLACES

Send information for Going Places to dhillyer@crain.com

JOB CHANGES ARCHITECTURE MOODY NOLAN: Shannon Thorsen to director, Cleveland operations; Chris Petrow to project manager; Samuel A. Marcum to project architect; Jakiel Y. Sanders to project coordinator.

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RDL ARCHITECTS: Christian Hunter to senior content strategist.

CONSULTING FINDLEY DAVIES: Jason Rothman to senior consultant and member, Technical Resources Practice Group.

ENGINEERING CT CONSULTANTS INC.: Jennifer Brown to economic development strategist.

FINANCE CLEVELAND FEDERAL RESERVE BANK: Ellis Tallman to senior vice president and research director. FIFTH THIRD BANK: Thomas Stuckart to vice president, senior trust officer. HOME SAVINGS AND LOAN CO.: John Cunningham to senior vice president, commercial market manager.

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UNIVERSITY HOSPITALS ELYRIA MEDICAL CENTER: Niraj Mistry, M.D., to internal medicine physician.

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INSURANCE HOFFMAN GROUP: Heather Moyer to account executive; Kathryn M. Barclay to commercial lines account manager; Kellie Gaebelein to commercial lines account assistant; Kim Badarzynski to agency support technician. HYLANT: Steve Ligus to vice president and employee benefits department leader.

FINANCIAL SERVICES BOBER MARKEY FEDOROVICH: Rachel L. Brandt to manager, assurance and advisory services; Amy Ciccotelli to manager, taxation services. CARNEGIE INVESTMENT COUNSEL: Brenton K. Luce to senior portfolio manager. FIRSTCREDIT INC./REVCARE/PAYMED SOLUTIONS: Jennifer Fiske to eligibility supervisor; Regan Zuercher to director of billing and client performance; Lia Goehler to client support billing specialist. GDK & CO.: Mike Zeleznik to associate.

LEGAL DWORKEN & BERNSTEIN CO. LPA: Anna Parise, Jonathan Stender and Kristen Kraus to partners.

AVISON YOUNG: Jonathan E. Elson to senior associate.

STAFFING DIRECT CONSULTING ASSOCIATES: Bill Felberg to director of sales.

BOARDS SOCIAL VENTURE PARTNERS: Dominique Litmaath to president; Dick Cahoon to treasurer; Shilpa Kedar to vice president; Laura Malone to secretary.

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MASS COMMUNICATION: Kate O’Brian (Al Jazeera America) received the 2015 Robert G. McGruder Distinguished Guest Lecture and Award for Diversity; Lillian Pyles received the 2015 Diversity in Media Distinguished Leadership Award. PUBLIC RELATIONS SOCIETY OF AMERICA GREATER CLEVELAND: Ed Stevens (Stevens Strategic Communications Inc.) received the 2015 Davis Young Award.

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LET US KNOW ABOUT THE TOP TECH LEADERS The second “Who to Watch” section of 2015, “Who to Watch in Technology,” is scheduled for publication June 22. It will highlight up-and-comers and innovators in technology. If you think you know who will be among those leading the Northeast Ohio tech sector of the future, drop an email to sections editor Amy Ann Stoessel, astoessel@crain.com, or call 216-771-5155. Send your suggestions no later than noon on Monday, May 11.

Please include the person’s name, position and a paragraph explaining why he or she stands out. There are no hard and fast requirements for this section, other than the candidate needs to exhibit the kind of potential that makes him or her someone to watch in the technology sector. Keep an eye out later this year for more of these sections: Who to Watch in Manufacturing, Sept. 28; and Who to Watch in Marketing and Creativity, Dec. 7.

YOU CAN WATCH US, TOO Look for Crain’s Weekly Report webcast, which will hit your inbox on Friday afternoon. To sign up, go to: crainscleveland.com/register.

Crain’s Cleveland Business and the Cleveland Foundation have partnered to create an unprecedented comprehensive report bringing together scores of significant data points to give our community a snapshot of Greater Cleveland’s vital signs.

Publication date: June 1 | Ad close: May 1 | Artwork due: May 7 This supplement will serve as an annual reference guide for nonprofits, businesses, community leaders and anyone interested in our region’s future. Book your ad today. Contact Nicole Mastrangelo at 216-771-5158 or nmastrangelo@crain.com.

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PUBLISHER:

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OPINION

Pay own way McDonald’s earlier this month announced it would pay workers at its company-owned restaurants $1 more than the local minimum wage. The fast-food giant joins other big companies, such as Walmart and Target, that have recently agreed to boost workers’ wages. Some will now pay $9 per hour this year, others will go to $10 in 2016. There are many factors driving these pay hikes: The economy is beginning to pick up. Big corporations, long criticized for keeping wages low, are bowing to public pressure to increase wages. And companies want to stay competitive in a tightening labor market. When workers have more choices, they have more power. And these employers realize that to maintain a strong workforce, they’re going to have to pony up. That’s competition. And that’s good for business. Still, beyond the actions taken by individual employers, pressure remains for a government-mandated raise in the form of an increase in the federal minimum wage for the first time since 2009. The federal rate currently stands at $7.25 per hour, but many states, including Ohio, already have a higher minimum. Some labor groups are pushing for $15 an hour. President Obama floated a $10.10-an-hour proposal. Wage increases are a good thing not only for earners but for the businesses that will benefit from their spending. But they’re not so good when those raises come at the expense of companies that cannot afford it and have no say in the matter. Businesses that can put more money in employees’ pockets — like McDonald’s and Target — should. But the decision to do so shouldn’t be another legislative mandate. It should be determined by the marketplace. McDonald’s, Walmart and Target are proving that the marketplace already is driving wage hikes. So let it. Government-mandated wage increases will adversely affect businesses that run on tight margins — and that means, specifically, small businesses. Basic economics tells us that every increase equals a decrease somewhere else. Salary increases must be paid for from somewhere — so profit margins are cut or prices go up or fewer workers are hired or employees are laid off. If a company is willing and able to make that math work and if it benefits their workers and their business, more power to them. Wage increases often make for happier employees. Happier employees make for happier consumers. Let the free market decide. But let’s not shackle businesses that are struggling to survive by issuing a well-meaning mandate that could potentially force them to cut workers or go out of business. Allow businesses to decide for themselves — with input from their workers, their customers and in concert with the markets in which they operate — whether pay increases make sense for them.

FROM THE PUBLISHER

Here’s your Brando business translator My son is almost 15 and, on most potential competitor. “Keep your friends close,” he said, “but your enemies closdays, he’s more adult than child, so my er.” wife and I recently decided he was ready Despite the cultural signififor an important rite of pascance of “The Godfather” sage. franchise, not every business He was ready to watch “The professional has seen the Godfather.” movies, and investing almost (We also OK’d “The Godfasix hours to do so — nine if ther, Part II.” But we refused to you endure “Part III” — might screen “Part III” — for the not be realistic. same reason we stopped So I’m here to help. If you spanking our children.) haven’t seen the films and Watching these epic films is find yourself in a meeting with really a necessity for anyone a colleague imitating Marlon who wants to speak and un- JOHN Brando, use the translations derstand the language of CAMPANELLI below to figure out what the American culture. I told my heck is being said. son a week will not pass the ■ “We’ll make ’em an offer they can’t rest of his life that he will not notice an refuse.” Translation: We will be includallusion to the movies. (In fact, a few ing Cavaliers tickets in our next proposdays after we watched the first film, we al. saw a horse-head-in-the-bed reference ■ “Frank in sales sleeps with the fishes.” on … an episode of “Barbie: Life in the Translation: Frank in sales told off the Dreamhouse”!) boss and was asked to clean out his desk. My Corleone antennae are now up, ■ “Today, we take care of all family busiand I’ve begun noticing how often Vito, ness.” Translation: Reorganization. Michael, Sonny and Fredo come up in ■ “I made my bones in this business business meetings. when you were going out with cheerLast week, I heard a business leader leaders!” Translation: I’m discovering suggest that a colleague reach out to a

that working with millennials is a challenge. ■ “A man who doesn’t spend time with his family can never be a real man.” Translation: I’d appreciate a little more work-life balance, please. ■ “We’re going to the mattresses.” Translation: The parking garage is raising prices, and we are not going to take it. ■ “Never tell anyone outside the family what you are thinking.” Translation: Do not post work stuff on Facebook. ■ “What have I done for you to treat me so disrespectfully?” Translation: Why did you do a reply-all? ■ “Oh Pauly, you won’t see him no more.” Translation: Pauly has been transferred to IT. ■ “I know it was you, Fredo. You broke my heart.” Translation: I know you stole my yogurt from the office fridge. ■ “There are negotiations being made that are going to answer all of your questions and solve all of your problems. That’s all I can tell you right now.” Translation: We are looking at moving into a high-deductible health plan. ■ “This is business. Not personal.” Translation: It’s personal.

TALK ON THE WEB Re: Other cities crave downtown grocers Hurrah for us. It is great to see Cleveland leading the pack with something so important as this downtown food effort. It proves that when enough people who want to make it happen get together, they will make it happen. It may have taken Cleveland longer than other cities to create a real downtown living environment, but we have quickly caught up and moved ahead of many. Spending as much time as I do in Chicago, I would never think to compare Cleveland to Chicago. Chicago has always had a substantial population living in and around the LOOP so it is only natural that they have even more of everything today.

Now all we have to do is get everyone to start bragging to their local and outof-town friends about how Cleveland is a great place to live whether downtown or surrounding downtown with great culture, great recreation and now great access to great food. Let’s keep it up. — Neil Dick

Re: Insights from the film fest Yes, yes, yes! This article gives a wonderfully accurate picture of the breadth and quality of the film festival … and most especially of the tone of the whole CIFF … friendly, extremely helpful staff, great interaction with filmmakers, and a major focus on making the filmgoers experience a mind-expanding adventure. — LaSalle1948

Re: Join the Internet of Things revolution #IoT is very exciting as is the the #cloud ecosystem IoT will live on. The time for educating non-technical and technology-as-a second language leaders is at hand. We are the best location in the nation. — Todd D. Lyle

Re: LaunchHouse shifts focus I wish this dug deeper. Like, what was the ROI on all the businesses LaunchHouse funded? And how does that ROI compare to other incubators? Summer camps are great, but is it the best use for Shaker Heights nonprofit dollars? — Matt Wilson

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CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

Canadian manufacturing company hitting target here AIM has invested more than $2 million in its facility on cityâ&#x20AC;&#x2122;s east side By DAN SHINGLER dshingler@crain.com

When Canadaâ&#x20AC;&#x2122;s American Iron and Metals, or AIM, wanted to expand in the United States in 2012, it targeted Northeast Ohio. The region had the ingredients the company figured it needed to grow here. There was plenty of manufacturing, construction and other activities that generate scrap metal, as well as strong transportation resources and a good local customer base of steel mills and other buyers of scrap. It wasnâ&#x20AC;&#x2122;t just the region, but Cleveland in particular, that attracted AIM. The company purchased Macedonia-based Conversion Resources in 2012 and promptly moved the company to the cityâ&#x20AC;&#x2122;s near east side, just off Marginal Road. â&#x20AC;&#x153;They believed in Cleveland and wanted to be part of it,â&#x20AC;? said AIM Clevelandâ&#x20AC;&#x2122;s Michael Simms, who was brought in as the local operationâ&#x20AC;&#x2122;s new president in January after spending more than 30 years managing other local scrap and recycling operations. Less than three years later, Simms said the company has invested $2 million to $3 million building new offices and upgrading its warehouse, expanded into new types of metals and more than doubled its payroll. It now employs 30 people at its 75,000 square-foot

warehouse at the former Ryerson Inc. steel yard that AIM bought in 2012. â&#x20AC;&#x153;They had a huge, huge belief that the city of Cleveland is still a sleeping giant for good industry. And theyâ&#x20AC;&#x2122;ve literally spent millions to build a business here and become a good corporate citizen,â&#x20AC;? Simms said.

â&#x20AC;&#x153;They had a huge, huge belief that the city of Cleveland is still a sleeping giant for good industry. And theyâ&#x20AC;&#x2122;ve literally spent millions to build a business here and become a good corporate citizen.â&#x20AC;? â&#x20AC;&#x201C; Michael Simms president, AIM Cleveland, on the Canadian company While Conversion Resources worked only with non-ferrous metals like copper and aluminum, AIM Cleveland has expanded into iron and steel, which now account for nearly one-quarter of its revenues. Rebar from the Inner Belt bridge demolition crowds its yard, along with steel from other demolition projects and other scrap. The company continues to grow. Simms said three workers have been hired since Jan. 1, with more likely coming aboard later this year.

That said, itâ&#x20AC;&#x2122;s shaping up to be a tough year for metal recycling. Demand for iron and steel by local mills is down, due to a slowdown in oil and gas drilling nationally. Scrap steel that was fetching as much as $700 a ton before the recession now sells for a bit more than $250 a ton, which means that companies like AIM take their margin from a smaller revenue base. But AIM Cleveland has expanded its markets. As a much larger company than Conversion Resources was, AIM has five agents in China, where Simms now sells copper and other high-value scrap to a market still hungry for resources. Itâ&#x20AC;&#x2122;s a cyclical business, and Simms said Cleveland is still the place AIM wants to be. Recyclers are a bit like ore miners â&#x20AC;&#x201D; they have to go to where their raw materials are and, if possible, would like to be close to their customers as well. Cleveland offers both. â&#x20AC;&#x153;AIM believes in Northeast Ohio and found a great opportunity to have a presence here and especially in Cleveland,â&#x20AC;? Simms said. â&#x20AC;&#x153;There are numerous steel mills located in our region and there still is a significant number of stampers, steel service centers, steel fabricators, machine shops and other small businesses that generate scrap,â&#x20AC;? he said. â&#x20AC;&#x153;While the Cleveland area has lost some manufacturing, it is still a great location for the metal recycling business.â&#x20AC;?

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APRIL 13 - 19, 2015

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The Internal Revenue Service filed tax liens against the following businesses in the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protect the interests of the federal government. The lien is a public notice to creditors that the government has a claim against a company’s property. Liens reported here are $5,000 and higher. Dates listed are the dates the documents were filed in the Recorder’s Office.

LIENS FILED

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CELL ONE COMMUNICATIONS INC. 5342 Northfield Road, Maple Heights ID: 01-0768068 Date filed: March 13, 2015 Type: Unemployment, failure to file complete return Amount: $7,631 AMERICAN MIDWEST ENTERPRISES INC. PAPONETTIS 5805 Smith Road, Brook Park ID: 34-1583758 Date filed: March 6, 2015 Type: Employer’s withholding, unemployment Amount: $7,003 TEEDIEBUTT ENTERPRISES INC. 26098 Pettibone Road, Oakwood Village ID: 33-1016556 Date filed: March 6, 2015 Type: Unemployment Amount: $6,891 LITTLE SCHOLARS CHILD DEVELOPMENT CENTER LLC 5165 Lee Road, Maple Heights ID: 27-4931176 Date filed: March 9, 2015 Type: Employer’s withholding Amount: $6,767

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INTERNATIONAL POWER MACHINERY CO. 21749 Shelburne Road, Shaker Heights ID: 34-0645641 Date filed: March 13, 2015 Type: Employer’s withholding, unemployment Amount: $7,841

Asphalt Paving • Pavement Milling Pavement Marking • Hot Mix Production Facility • Concrete and Excavating Services

AMA VENTURES 15973 Broadway Ave., Maple Heights ID: 27-3249833 Date filed: March 6, 2015

www.RonyakPaving.com

Type: Employer’s withholding, corporate income Amount: $6,511 FANTACO INC. 3600 Ridge Road, Cleveland ID: 34-1781035 Date filed: March 6, 2015 Type: Corporate income Amount: $6,117 BEMBA K. JONES P S & ASSOCIATES INC. 3368 E. 113 St., Cleveland ID: 34-1765316 Date filed: March 4, 2015 Type: Employer’s withholding Amount: $6,076 WIRELESS EVOLUTION INC. 10139 Royalton Road, Suite A, North Royalton ID: 27-0189899 Date filed: March 6, 2015 Type: Employer’s withholding Amount: $5,798 NICKILODEON CHILD CARE CENTER INC. 4836 Northfield Road, North Randall ID: 20-5854316 Date filed: March 13, 2015 Type: Employer’s withholding, unemployment, corporate income Amount: $5,513

LIENS RELEASED ALERT DOOR & OPERATOR CO. 5534 Pearl Road, Parma ID: 34-1005976 Date filed: Oct. 17, 2014 Date released: March 9, 2015 Type: Employer’s withholding Amount: $25,178 ALL NATIONS DELIVERANCE MINISTRIES INTERNATIONAL INC. 15715 Libby Road, Maple Heights ID: 13-4248397 Date filed: Feb. 7, 2014 Date released: March 9, 2015 Type: Employer’s withholding Amount: $12,702 ARTISAN ELECTRICAL CONTRACTORS INC. P.O. Box 12468, Cleveland ID: 34-1262732 Date filed: Feb. 11, 2005 Date released: March 13, 2015 Type: Employer’s withholding Amount: $5,275 CHARLES P BRAMAN & CO. INC. 23300 Chagrin Blvd., Suite 102,

Beachwood ID: 34-0877051 Date filed: Oct. 19, 2010 Date released: March 6, 2015 Type: Employer’s withholding, corporate income Amount: $22,083 GTC AUTO INC. CHERNOWS AUTOMOTIVE CLINIC 17050 Broadway Ave., Maple Heights ID: 20-0540934 Date filed: July 5, 2012 Date released: March 6, 2015 Type: Employer’s withholding Amount: $9,263 J & G SHOE REPAIR INC. 14414 Cedar Road, Cleveland ID: 34-1487108 Date filed: June 22, 2005 Date released: March 6, 2015 Type: Employer’s withholding, unemployment Amount: $41,987 JOSMARI INC. 30789 Pinetree Road, Pepper Pike ID: 30-0249532 Date filed: Aug. 9. 2005 Date released: March 6, 2015 Type: Employer’s withholding, unemployment Amount: $9,714 JRG PERFORMANCE TECHNOLOGIES CORP. 340 Balmoral Drive, Richmond Heights ID: 34-1840584 Date filed: April 28, 2008 Date released: March 6, 2015 Type: Employer’s withholding Amount: $28,167 PETTY GROUP LLC 550 Harvard Ave. Rear, Newburgh Heights ID: 20-1749244 Date filed: Dec. 30, 2014 Date released: March 6, 2015 Type: Employer’s withholding, unemployment Amount: $28,849 RL PACKAGING INC. 1831 E. 36 St., Cleveland ID: 02-0614198 Date filed: April 22, 2005 Date released: March 6, 2015 Type: Employer’s withholding, unemployment, failure to file complete return Amount: $31,773

700 W. St. Clair Ave., Suite 310, Cleveland, OH 44113-1230 Phone: (216) 522-1383, Fax: (216) 694-4264, www.crainscleveland.com

Cuyahoga & Lorain County companies:

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MIDDLE MARKET FILLING IN THE MISSING PIECES

Companies that are growing often need to build and expand their leadership team By CHUCK SODER csoder@crain.com

The founders of Explorys saw the tidal wave coming. One after another, big hospital systems have been signing up to use the Cleveland company’s software to analyze huge amounts of patient data. It’s the kind of growth that can cause problems for leadership teams that were built to run smaller companies. Stephen McHale didn’t want his team to fall into that category. Thus, Explorys took a step that many companies take as they leave the “small business” category behind and enter the middle market: It expanded its leadership team. The company has hired five new executives since December. In the process, it more than doubled the size of its leadership team. It was a necessary move, according to McHale, the company’s CEO. Explorys is only six years old, but it already employs more than 140 people. And it plans to hire 80 more

in 2015, he said. But until recently, the company for the most part was still being run by the same people who founded it in 2009, back when it spun off from the Cleveland Clinic. Thus, McHale and his colleagues decided to take action. “We said, ‘OK, we’ve got to get in front of this tsunami,’ ” he said. Many growing companies don’t get in front of the wave. They get hit by it, according to Matt Stencil, a Cleveland-based partner with executive recruiting firm Heidrick & Struggles. But it’s that pain — maybe the company loses a customer or starts falling behind a competitor — that often drives them to expand their leadership team or make changes to it, according to Stencil, a partner with the Chicago-based firm’s industrial practice and its CEO and board search practice.

Wave watching So how can you spot that a wave is coming? And ride it?

Companies often need to change or expand their leadership teams when they expand in some way. Maybe they enter a new geography or expand into a new product area, one in which they don’t already have a lot of expertise, Stencil said. Sales growth can be a good gauge as well. By the time a company hits $50 million in annual sales, its founders usually need to bring in additional leadership — especially if they want to grow to $100 million, according to Chris Nash, vice president and managing partner at Rogers Group, a recruiting firm in Middleburg Heights. “It’s not just going to happen on accident. You need people driving activity,” Nash said. For instance, this past year, Rogers Group helped a local, family-owned company add two C-level executives in sales and operations. And that company is generating nearly $50 million in sales. Some companies will add someone with financial expertise at that stage, too, he said. The key, however, is to project

when your company is going to outgrow the capabilities of its existing leadership team and external consultants, according to Stencil and Nash. That means sitting down and figuring what those existing capabilities are and what new ones you’re going to need. It also means projecting how many employees your company will have and in general, where it’s headed. Explorys did that, with the help of an organizational consultant. McHale noted that he and his cofounders, Charlie Lougheed and Dr. Anil Jain, are entrepreneurial types. Between them, they know a lot about the technology, setting a vision for the company and working with customers. But they needed help as the company grew, McHale said. So in December, they hired three vice presidents — one responsible for engineering (Adam Wallace), one for operations (Greg Yarrington); and one for client services (Patrick Wells, who filled a role that involves several functions). Two

months later, they picked up a chief financial officer (Aaron Cornell) and a vice president of sales and channel partner development initiatives (Howard Schreiber). “We needed another layer … another level of leadership to manage these people,” McHale said.

No rest for the weary If Explorys keeps growing, they’ll eventually need to add even more layers, like Hyland Software has done over the years. Today, the Westlake-based company, which makes OnBase-brand content management software, has 20 people on its executive team, up from 10 in 2004. It has added layers of middle management as well. When it had about 500 employees, it created new supervisory positions called team leads, according to Brenda Kirk, vice president of strategy at Hyland Software. Today, Hyland has more than 100 team leads, who report to See PIECES, page 18

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TAX TIPS

APRIL 13 - 19, 2015

CARL GRASSI

If you want credit, act quickly What good is all this tax and business knowledge unless we share it? Visit meadenmoore.com and click on ¸ISVN¹ MVY V\Y SH[LZ[ Ä UHUJPHS PUZPNO[Z and advice.

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A deadline is fast approaching for employers to take advantage of a tax credit that was scheduled to expire at the end of 2013 but was extended retroactively late last year. In a tough job market, disadvantaged people can find it even more difficult to find work than most. To encourage employers to hire these workers, a tax credit has been available since 1996. The Work Opportunity Tax Credit is a tax credit available to employers who hire individuals who are members of certain designated target groups, generally economically or physically disadvantaged people and qualified veterans. Although the Work Opportunity Tax Credit expired at the end of 2013, last year’s tax extenders legislation retroactively provided the credit for employees who began work before Jan. 1, 2015. There are many different categories of eligible employees, with some categories providing a larger credit than others. This can make determining whether an employee qualifies somewhat complicated. In general, employers hiring people from the following groups will be eligible for the credit: ■ Families receiving payments under the Temporary Assistance for Needy Families program ■ Qualified veterans, such as those who have been unemployed and/or have military service-connected disabilities ■ Designated community residents (generally those living in economically depressed areas) ■ Qualified food stamp recipients ■ Qualified Supplemental Security

DEAL MAKERS NOT DEAL BREAKERS

The Business Attorneys of

Mergers, Acquisitions & Dispositions | Drafting

Grassi is president of McDonald Hopkins LLC. Income (SSI) recipients ■ Long-term family assistance recipients, which includes families receiving assistance under a IV-A program for at least the 18-month period ending on the hiring date The Work Opportunity Tax Credit is based on a percentage (25% for employees who worked more than 120 hours but less than 400 hours, and 40% for employees who worked 400 or more hours) of qualified first-year wages, which are limited depending on the category of employee. No credit is allowed for employees who work less than 120 hours. Employees who qualify as “long-term family assistance recipients” can generate a credit for the employer equal to 50% of the employee’s qualified second-year wages. The maximum eligible credits for the various types of employees is limited by the amount of qualified first-year wages. For instance, a veteran who has been unemployed for at least four weeks but less than six months can generate a $2,400 credit, based on 40% of $6,000 in qualifying wages, whereas a veteran who has been unemployed more than six months and has a service-related disability can generate a $9,600 credit based on 40% of $24,000 of qualified first-year wages. For most groups, the Work Opportunity Tax Credit equals 40% of eligi-

ble wages, up to $6,000 per employee during the first year of employment, for a maximum credit of $2,400 per employee. The Work Opportunity Tax Credit is one of the credits that comprise the general business credit, although the Work Opportunity Tax Credit is specifically deductible for alternative minimum tax purposes. For partnership and S corporations, the Work Opportunity Tax Credit is allocated among the owners and claimed on the owner’s tax return. Credits not used in the current tax year may be carried back one year and carried forward 20 years. Before an employer can claim the Work Opportunity Tax Credit, the employer must obtain certification that the hired individual is a targeted group member. Certification of an individual’s targeted group status is obtained from a Designated Local Agency by submitting a prescreening notice signed by the employee no later than the 28th day after the individual begins work. Form 8850 is used for purposes of obtaining the certification. Because the 28-day period for most hires during 2014 would have expired prior to the extension of the Work Opportunity Tax Credit, the extension for 2014 would still be pointless, unless the IRS granted employers additional time to comply with the certification requirements. That is what the IRS does in Notice 2015-13. This Notice provides transitional relief and extends the deadline to submit Form 8850 to April 30, 2015, for employees hired between Jan. 1, 2014, and Jan. 1, 2015, and who otherwise satisfy the Work Opportunity Tax Credit requirements. That is the good news. The less good news is that you will need to act fast to qualify for the credit in 2014, but it may be worth your while. While the Work Opportunity Tax Credit has once again expired as of Jan. 1, 2015, it is a perennial item reinstated with extender legislation. Therefore, employers may consider requesting employees who are newly hired in 2015 to complete and sign Form 8850 in the event the Work Opportunity Tax Credit is extended through 2015.

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ADVISER

MARK FILIPPELL

STAY CONNECTED WITH CRAIN’S

Sun’s shining on a sellers’ market I grew up in Indiana where agriculture is a way of life. Every Hoosier knows the expression: “Make hay while the sun shines.” Hay that is cut and baled when wet loses its nutrients and is likely to rot. As a result, timing the harvest is critical. Many a valuable crop has been ruined by delaying the harvest, wasting an entire growing season’s bounty. Companies are much like hay in this respect, but they gestate over a longer period. Their owners work diligently for years to build an enterprise’s value, not just one growing season. Company managers prepare the ground (do market research); plant the seeds (introduce new products); fertilize the plants (develop marketing campaigns); weed the field (improve efficiency); and go to the farmers market (sell their products). If successful, the result is an enterprise that provides value to the owner and his family in a variety of ways. In a way, selling the business is the ultimate harvesting of the crop. I would be the first to tell you that, at any given time, most business owners should not consider selling their business. They need it for their livelihood and are still building its value. However, business owners should consider a sale if they lack the resources to take their business to the next level; have a business with

CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

Filippell is a managing director at Western Reserve Partners LLC. He is the author of “Mergers & Acquisitions Playbook: Lessons from the Middle-Market Trenches,” published by John Wiley & Sons. unique strategic value; have age or health issues that make financial liquidity desirable; or see other opportunities they wish to pursue. There may be a world in which the market for private companies is consistently strong. If it exists, I hope to visit it someday. However, in the world I know the market for companies is rather fickle — during some periods truly excellent companies struggle to find buyers and during others it is truly a sellers’ market.

This is one of the latter times. This is the kind of market about which sellers dream. Why is the market for selling companies so strong right now? It boils down to a classic imbalance between supply and demand. The number of companies available for sale has remained relatively constant. But the demand for good businesses is piping hot and coming from a number of directions: ■ Public company acquirers: The Dow, the S&P 500 and the NASDAQ are all near record high levels. These public companies have to keep growing to maintain or improve their stock prices. Their dilemma is that most do not have the internal growth rates necessary to meet analysts’ expectations. For many, acquisitions are the best ways to achieve the required growth. And, given public companies’ $2 trillion of parked cash, they have the resources to make deals happen. (It is estimated that there is half a trillion to a trillion of cash on the balance sheets of U.S. private companies as well.) ■ Abundant and inexpensive debt: Although the prime rate is only 3.25%, banks are struggling to lend their burgeoning balance sheets. This is a night-and-day change from the banking crisis of a few years ago. Since bank debt is the “fuel” for acquisitions, this is like putting 110 octane fuel in every acquirers’ gas tank: See ADVISER, page 17

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Having a sounding board can be a critical asset By KIMBERLY BONVISSUTO clbfreelancer@crain.com

As Ohio’s middle market expands, companies of all kinds also are turning to advisory boards to help guide them through the strategic challenges associated with growth. John Lanigan, dean of the School of Business at Baldwin Wallace University, for example, is one of five advisory board members to G3 Enterprises, a family-owned California company founded by the third generation of the Gallo family. The

company bottles, ships and manufactures labels and corks for wine. “Our role is to give advice and to help with the debate when there are issues that need to be discussed,” Lanigan said of the advisory board. “This company looked to bring in a variety of backgrounds and opinions complimentary to their business. From my perspective, that’s the smart way to go.” Dave Campbell, chief financial officer and executive vice president of Bravo Wellness LLC, a Clevelandbased provider of results-based wellness incentive plans, was in-

strumental in creating and populating his company’s advisory board in 2012. He said advisory boards are the best opportunity for validating a company’s most crucial strategies from the outset. “In today’s business world you don’t get a lot of second chances. You need to get it right, or close to right, the first time,” Campbell said. “The best way to do that is testing your ideas and strategies with people who really help you validate them before they are launched.” Jeff Malbasa, president and chief operating officer of Spero-Smith Investment Advisers Inc. in Cleveland, said his company’s advisory board began to discuss succession planning in the mid-1990s. The board evolved over time and now serves as a sounding board for the investment firm. “It’s our way of getting the opportunity to say things out loud,” Malbasa said. Most advisory boards are populated with individuals of varying experiences and backgrounds. Malbasa said the most important question to ask is if the company will value the advice of an adviser even when they disagree.

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“If the answer is yes, that’s a great board member,” Malbasa said. Campbell said finding individuals who are comfortable engaging in wide-ranging debates is important. “What’s most important is to make sure you’re not myopic in your thinking and have a broad set of eyes,” Campbell said of advisory boards. “One thing you want to do is really understand the core strategies of your company and surround yourself with people who have the skills and competencies, interests and experiences to supplement where you’re trying to be successful.” Campbell said good advisory board members offer eyes and ears into a specific industry to provide a company with a sense of what’s really going on in the business world. He said the best advisers are recognized influencers in a given industry and can open doors to contacts to improve a company’s prospects. Companies that employ advisory boards gain perspective on key issues from experienced business leaders that allow a company to expand its thinking. For the advisory board members,

depending on their career status or stage of life, serving on an advisory board provides an opportunity to give back and share experiences and expertise with a company looking to move its business forward. Lanigan said after moving from a career in business to academia, serving on an advisory board keeps him connected and current in the business world. “I’m exposed to current real business problems with this company,” Lanigan said. “I get regular communications with the company and see its financial results. We discuss all the business issues and challenges. We go through the budget process and marketing. This helps me stay current in the world of business in a very real way.” There is no one way to compensate a board to provide independent and objective feedback. “Folks who do this are not doing it to make money,” Campbell said. “They’re doing it because they have a genuine interest in seeing others succeed and enjoy the intellectual challenge of being engaged in a business. “ Spero-Smith provides a contract See BOARD, page 17

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They can go a lot faster (pay a lot more) than they could with 87 octane. ■ Financial sponsors: The financial sponsor community has more than $500 billion of committed equity. This works out to about $1.5 trillion of acquisition purchasing power — and they want to spend every dime. This means they are working around the clock to pitch, negotiate and close deals. This has resulted in a class of buyers that is more active and often more aggressive for middle-market companies than public acquirers. ■ Overseas buyers: Even though the U.S. has its challenges, many overseas companies, especially Europeans, consider the United States an excellent place to invest their capital. Many are actively trying to move equity over to the United States. As a result of the imbalance

between the limited supply vs. the well-financed burgeoning demand for middle-market companies, acquisition prices are at outstanding levels. Businesses that sold for four to five times EBITDA during the Great Recession command seven times EBITDA today. Many owners have seen EBITDA grow dramatically over this period, making the total price two to three times higher than before. There have been few times over the last century when the M&A market has offered comparable values. Farmers know to “make hay while the sun shines.” Well, the sun is blazing right now for the owners of middle-market companies. Shareholders who do not at least consider “harvesting” their business’ value in today’s strong market are akin to farmers who do not cut and bale their hay when it is mature and the weather is ideal.

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BOARD continued from page 16

for advisers that spells out expected duties and compensation that includes a stipend per meeting and participation in a company equity plan. Malbasa said his company pays board members per meeting, but the company is always exploring how to best structure compensation. He said there is a growing push to provide equity in companies to attract board members “truly moti-

vated to assist you and work on your behalf.” Lanigan said he has no formal contract in his advisory role, but he is compensated. “It varies by company and the status of the company,” Lanigan said. “Startups may be different because they are not in a cash position to pay. Sometimes advisers are paid in equity. There are lots of different models. “There is not a one-size-fits-all compensation model,” he said.

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company managers. Those managers in many cases report to company directors — a role Hyland created after it hit about 1,000 employees, Kirk said. The company’s leadership team has come a long way since the early 1990s, when they used superhero names instead of titles on their business cards. But that team is still evolving: For instance, about 18 months ago it hired an external human resources consultant (who now

is a full-time employee) to lay out everything that someone in a particular job needs to do and know. That way, if a project coordinator wants to eventually become a project manager, the HR department will be able to tell that person what skills and knowledge he or she will need to get that promotion. Those formalized job descriptions should help lower-level Hyland employees grow — and become company leaders in the future.

“That helps them do that monkeybar movement around the company,” Kirk said. So how do you find a good leader? Hyland looks for drive, passion “and an incredible appetite for learning and teaching,” Kirk said. Explorys, meanwhile, asks questions during the interview process designed to give the company a glimpse of how the person behaves in different situations. Nash likes personality tests. He once took one that was so accurate that his “jaw just dropped.” He also says companies should try to hire “doers.” For instance, Nash recently recruited someone who started his own landscaping company when he was 13 years old. “This guy was out there doing it at age 13, on his own,” he said. One more thing: Even if you hire great people to fill out your growing leadership team, remember that the process of adding new leaders or replacing old ones can be disruptive. People worry about their jobs when they get new bosses. Team chemistry changes. People get confused about who should be doing what. Companies need to keep a close eye on their culture after they make significant leadership changes, Stencil said. And they should “be very deliberate” when describing what each new leader will do and what areas and people they oversee. Talking to people can solve a lot of problems, according to Kirk. “The magic bullet to all of it is communication,” she said.

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Companies should pluck leaders from other companies when they need to “look at things with a different set of eyes and hear things with a different set of ears,” said Chris Nash, vice president and managing partner at Rogers Group. For smaller middle market companies, it’s often a good move to bring in a CEO from outside the company as it grows, Nash said. That’s because the founder often doesn’t have much expertise running a larger company. Of course, replacing the founder could be hard if he or she owns a majority stake in the company and doesn’t want to relinquish control, Nash said. “That only works if there’s strong leadership to begin with,” he said. As middle market companies get bigger, however, it becomes harder to hire outsiders to fill the highest leadership positions, according to Matt Stencil, a Cleveland-based partner with executive recruiting firm Heidrick & Struggles. Any company that brings in several hundred million dollars in revenue each year should be very intentional about coaching future leaders and having them work in different parts of the organization, he said. That’s especially true at the CEO level. If larger middle market companies want to bring in a CEO from outside the organization, they should surround the new leader with people who know the company well, Stencil said. But that’s easier to do at a multibillion-dollar company with lots of high-level executives, he added, noting Ford took that strategy when it hired its CEO, Alan Mulally, from Boeing. — Chuck Soder

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bring their clients. Itâ&#x20AC;&#x2122;s a great way to network and interact with your clients and employees.â&#x20AC;? Itâ&#x20AC;&#x2122;s the same downstate toward Columbus, where the Black Dog Farm near New Albany is not just nice, itâ&#x20AC;&#x2122;s downright posh. â&#x20AC;&#x153;The first time I visited Lesâ&#x20AC;&#x2122; property, I came back and told my wife, â&#x20AC;&#x2DC;You wouldnâ&#x20AC;&#x2122;t believe it. The grass in the middle of the woods is nicer than the grass in our front yard!â&#x20AC;&#x2122; â&#x20AC;? remembers a laughing Creekmur. Chandon Simonis, a senior portfolio manager with BNY Mellon in Columbus, said itâ&#x20AC;&#x2122;s one of the nicest clubs in the country, which is why he uses it not only to entertain clients and to hold corporate outings, but also as the site for an annual fundraiser he hosts to benefit children at Buckeye Ranch in Grove City. Teams of four pay $2,500 to participate each June. â&#x20AC;&#x153;We raise a quick $30,000 on a Saturday morning,â&#x20AC;? Simonis said. â&#x20AC;&#x153;After the shooting, we have a light, table-clothed, catered lunch,â&#x20AC;? he adds. But that kind of sums up the sporting clays game. It can be just about as casual or as fancy as the participants want so long as itâ&#x20AC;&#x2122;s safe and everyone gets to shoot and have a good time, participants and organizers say. Sure, there might be some comparison of guns, but there is more bragging about marksmanship. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s not about â&#x20AC;&#x2DC;my gun is better than your gun,â&#x20AC;&#x2122; itâ&#x20AC;&#x2122;s about breaking the clays,â&#x20AC;? Simonis said.

U.S. SPORTSMENâ&#x20AC;&#x2122;S ALLIANCE PHOTOS

Chandon Simonis, a senior portfolio manager with BNY Mellon in Columbus, says clay shooting is ideal for entertaining clients and fundraisers.

Home on the range The sport might also be getting a boost from Ohioâ&#x20AC;&#x2122;s newest industry â&#x20AC;&#x201D; oil and gas. â&#x20AC;&#x153;More people, especially in the oil and gas business, shoot than play golf. I was completely ignorant of that for a long time,â&#x20AC;? Creekmur said. â&#x20AC;&#x153;Then someone said to me, you know, in this industry, you really ought to be able to handle a shotgun.â&#x20AC;? Thatâ&#x20AC;&#x2122;s true, said Shawn Bennett, executive vice president of the Ohio Oil and Gas Asso-

ciation and another occasional clays shooter. And with more oil and gas workers, and their bosses, coming from out West, that trend might only grow larger. â&#x20AC;&#x153;When you have people who work outside for a living, they tend to be outdoorsmen. â&#x20AC;Ś Naturally, youâ&#x20AC;&#x2122;re going to start shooting sporting clays,â&#x20AC;? Bennett said. OOGA has itself gotten on board, at least with the related sport of trap shooting, for now. â&#x20AC;&#x153;We have an event at the summer meeting

that is trap shooting for our members, and it is always a very, very popular event,â&#x20AC;? Bennett said. But if people are attracted to the sport because of a networking opportunity, a chance to warm up to the boss or even because they want to support a favorite charity, the reason they stay is simple â&#x20AC;&#x201D; they like it. â&#x20AC;&#x153;It is expanding, because itâ&#x20AC;&#x2122;s just a more attractive way of getting together with people,â&#x20AC;? said Simonis. â&#x20AC;&#x153;And Iâ&#x20AC;&#x2122;ve had a number of people Iâ&#x20AC;&#x2122;ve taken out who have never fired a shotgun. The next thing you know, theyâ&#x20AC;&#x2122;re out buying their own gun.â&#x20AC;? Creekmur agrees, and says that even though he only began shooting fairly recently, heâ&#x20AC;&#x2122;s already made new friends with the sport. â&#x20AC;&#x153;The shooting community is a very welcoming community. They let a guy like me in; Iâ&#x20AC;&#x2122;ve played golf all my life but I never shot a gun until three years ago,â&#x20AC;? he said. Of course, there are some differences where in the minds of some, golf might still have an advantage. â&#x20AC;&#x153;You have to talk louder,â&#x20AC;? Spindel joked, â&#x20AC;&#x153;because youâ&#x20AC;&#x2122;ve got ear plugs in.â&#x20AC;? Then there is what might be the biggest difference of all. â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s no alcohol â&#x20AC;&#x201D; obviously,â&#x20AC;? Spindel said. â&#x20AC;&#x153;But that means you have to pay more attention to who youâ&#x20AC;&#x2122;re with.â&#x20AC;? Or, as Simonis put it, perhaps channeling a bit of Robert Duvall in a business suit: â&#x20AC;&#x153;Any day you can get a gun on your shoulder, smell some gun powder and spend time with friends is a good day.â&#x20AC;?

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unease and, in some cases, the departure of well-regarded employees, according to several wellplaced county staff and political observers, some of whom would not speak on the record because of their continuing relationships with Budish and the administration. In some cases, workers found out their jobs were on the line only when the human resources department posted their positions. “He knew he was taking over, he should have had a plan,” said one veteran of an earlier, city of Cleveland transition. “He didn’t think about the effect on sitting employees. For those people, it’s a scary situation.”

Often, an incoming leader will offer some reassurance. “When Frank Jackson defeated Jane Campbell, he told people, ‘As long as you don’t screw around, you have a job,’ ” though perhaps not the same job, this former official said.

Staffing struggles One of those who left before the Budish administration had made its decision was Bonnie Teeuwen, the director of public works, who had been praised for the way she handled the construction of the new county headquarters and the restructuring of the county’s real estate portfolio. She also had been

in charge of supervising the construction of the Hilton Cleveland Downtown, which is scheduled to open next year adjacent to the Global Center for Health Innovation. Her job was posted on Jan. 15. She resigned a month later. Teeuwen said she might have liked to have stayed on but had not heard from anyone from the Budish camp about their plans, so she decided she had to be proactive. “So I started looking around and found there was opportunity,” she said in a telephone interview. Teeuwen, an engineer, is working for Osborn Engineering Co., which is engineer of record for the current Public Square renovation.

Budish defends his process. “We are looking carefully at every (key) position,” he said. “We want the best people possible in government. Nothing is more important than personnel. “You don’t know who the best people are until you post the position,” he said. “I don’t know how else you look for people.” Julian Rogers, a former county council member who was executive director of the Budish transition’s Effective and Efficient Government Working Group, said that his group of 11 volunteers that focused on issues of service delivery and workplace culture but did not play a role in staffing. “I think (they could have been

thinking) that the government was up and running and (staffing) shouldn’t be that difficult,” said Rogers, who is now director of community partnerships in the office of civic engagement at Cleveland State University.

New territory To be fair, this is a first-of-its-kind transition for Cuyahoga County. Until 2011, the county was led by a three-person commission where collaboration among the commissioners would lead slowly to strategy evolutions. So when Ed FitzGerald became the first county executive, he had a blank organization chart that had to be filled in on Day One. With Budish coming in, there was no established way to handle an abrupt change of leadership led by an incoming executive. Nor is this a transition that demanded the kind of clean sweep you would have when leadership passed from one party to another or from an incumbent defeated at the ballot box by his successor. Still, Budish should have given the same level of scrutiny to the evaluation of staff that he gave to policy, observers say.

“Regardless of the political body you work for, there is a certain level of uncertainty when you’re at the cabinet level. My approach was to see what was out there. I have a family.” – Mark Parks former Cuyahoga County fiscal officer and now the finance director for the city of West Palm Beach, Fla. “That was definitely mishandled,” said one veteran of an earlier political transition who contributed to Budish’s campaign fund, who wondered who was vetting jobs for Budish. But even a county councilman who has not been afraid to criticize Budish or FitzGerald before him, has sympathy for the slowness of hiring by Budish. “It’s more of a challenge than in the private sector” where employers can offer signing bonuses and the like, said Dave Greenspan of Westlake. “And four years ago, there was a ‘shine’ on this new form of county government that attracted talented people. That shine is no longer there.” Greenspan, too, said he has not sensed that county operations have suffered. “There has not been a lack of leadership in day-to-day operations,” he said. In fact, any change in leadership brings with it insecurity. “Regardless of the political body you work for, there is a certain level of uncertainty when you’re at the cabinet level,” said Mark Parks, the former county fiscal officer, who began casting about for a new job even before the election results were in. “My approach was to see what was out there. I have a family.” He found there were opportunities, even more attractive jobs, and in March, Parks started working as finance director for the city of West Palm Beach, Fla.

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members met March 4 with Budish. “I got the impression he is very interested in helping people get to work,” Safier said of Budish. “And I think he recognizes he needs to turn to the business community for help.”

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Cuyahoga County Executive Armond Budish but he understood and acknowledged that that’s an issue we have to tackle.”

Talking points McNair and other members of the Presidents’ Council, a group of African-American business owners and executives who work to foster economic development in the African-American community, met with Budish on Feb. 26. Helping people find work was a big concern for this group, but they voiced other concerns as well. “For small- and medium-sized businesses, access to capital was a concern that many mentioned, as well as inclusion on the billions of dollars of development taking place in the community,” McNair said. McNair said Budish told the group he wants to better utilize the Western Reserve Fund for smalland medium-sized businesses and wants to see smaller businesses take advantage and reap some of the success that can come from the current building boom. A month earlier, Budish met with Carla Smith, executive vice president of the Healthcare Information and Management Systems Society, a key tenant in the Global Center for Health Innovation. “My impression is he is highly motivated around economic development for Cuyahoga County,” she said. She also said she got the impression, “he wants Cuyahoga County to be a place that welcomes innovation, that welcomes new businesses and that is open for business.” The HIMSS Innovation Center at the Global Center helps introduce

and train various groups — from returning veterans to high school students — in the growing health information industry. According to his staff, Budish has met since January with about 160 business leaders. Many he met individually, but he also had 18 group meetings with as many as 27 people at a session. In addition, during the transition after his November victory over Republican Jack Schron, a group of civic leaders identified dozens of economic development opportunities for the county. They included such issues as strengthening the effort to help existing businesses expand and making Cuyahoga County more welcoming to immigrants to working with the Greater Cleveland Regional Transit Authority to make it easier for transit-dependent people to get to jobs. Greg Zucca, a former county economic development official who managed the Western Reserve Fund under FitzGerald, believes that Budish will be ratcheting up the county’s economic development efforts, with a focus on smaller businesses. “I think Armond is very committed to small business growth and it’s very important to him,” said Zucca, who is now vice president of lending for the Economic Community Development Institute, a Columbusbased nonprofit microlender that has an office in Cleveland. “I see that he’s really making an effort to reach out to businesses in the community to understand what their needs are both in terms of access to capital and access to markets and ensuring that the county is partnering with organizations and institutions that can help businesses grow.”

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