Crain's Cleveland Business

VOL. 40, NO. 42

OCTOBER 21 - 27, 2019

Source Lunch

Akron Online rental matchmaker RVshare has a prolific summer. Page 20

The List

United Way of Summit County president and CEO Jim Mullen Page 22

Accounting firms, ranked by CPAs Page 17

FOOD

GETTING A FOOD TRUCK IN GEAR

Starting a mobile eatery has challenges, and startup costs can sometimes be surprising

By Mary Vanac clbfreelancer@crain.com

Kristen Leary of Manna Food Truck takes a customer’s order at a recent Walnut Wednesday at Cleveland’s Perk Plaza. (David Kordalski)

Focus

Lee Negrelli was coaching college softball in Wisconsin when she got the idea to start a food truck business.

“My husband and I were ready for a change,” Negrelli said. “We knew we were going to move back here to be closer to family. And so I figured, since I needed a new job anyway, it was the right time to make that leap.”

A Mentor native, Negrelli opened her Wild Spork food truck in July 2016.

Mobile food vending — think hot dog carts and lunch wagons — has been part of the American culinary scene for more than a century, according to a U.S. Chamber of Commerce Foundation report titled “Food Truck Nation.” But the modern food truck movement, characterized by experimental, gourmet and ethnic foods marketed through social media, started in Los Angeles in 2008, according to the report.

This year, an estimated 23,872 food truck businesses are expected to sell $1 billion worth of food and employ 28,916 people, according to market research firm IBISWorld. Since 2014, the food truck market has grown 6.8% per year, IBISWorld said in a March 2019 report, but that growth is expected to slow to 3% per year through 2022 because of increased competition and municipal regulations.

The Cleveland Department of Public Health, which issues licenses for mobile units of businesses based in the city, “has about 175 mobile units registered each year, inclusive of food trucks, hot dog carts and knockdown mobile units,” a representative said in an email.

SEE FOOD TRUCKS, PAGE 19

REAL ESTATE

Medina finds healthy ROI with wellness push.

Page 12 Entire contents © 2019 by Crain Communications Inc.

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Demand for workers is a growing construction contractor concern

By Stan Bullard sbullard@crain.com @CrainRltyWriter

Back-to-back years of strong growth have Northeast Ohio building and real estate types wondering how long the good times can last.

Meantime, their concerns have shifted, making their biggest business constraint the worry about securing skilled workers rather than lack of projects.

Roger Gingerich, partner-incharge of the construction and real estate practice at the Skoda Minotti

accounting and financial advisory firm in Mayfield Village, said that after completing the firm’s annual survey of construction contractors he believes that those in the industry are feeling less optimistic than in recent years even though they have a strong book of business.

“The feeling among many contractors is that they will make as much money as the number of people they can hire will allow them to,” Gingerich said in a Tuesday, Oct. 15, phone interview. “Everything points to people being cautious. We’re trying to keep the people we have. It’s hard to hire new people. But there is

more work out there we could be doing.”

Chris Halapy, the Cleveland-based president of Shook Construction of Dayton, said he feels “we have one leg in the camp that things are going to continue to expand and at the same time one leg in the camp that we need to watch overhead” because the market may slow down.

At the same time, he noted, as multiple contractors do, that the company has as good a backlog of work — that is, work it has been awarded but not yet started — as it has ever had.

SEE SURVEY, PAGE 21

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How Sherwin-Williams HQ might reshape downtown Paint and coatings giant, should it decide to stay close to current site, would have some intriguing choices

By Stan Bullard sbullard@crain.com @CrainRltyWriter

The Sherwin Williams Co.’s massive 18-story headquarters at 101 Prospect Ave. in downtown Cleveland is distinguished but mostly unassuming.

The ornate Romanesque building’s exterior has no reference to being the home since 1930 of what has grown to be one of the world’s largest paint and coatings makers. Most of its signage is at its Breen Technology Center, 601 Canal Road, in the belly of the Cuyahoga River valley.

However, if the company’s highprofile search for a new global headquarters site — proclaimed to include the surrounding region and several adjoining states — results in a renewed commitment to downtown Cleveland, its sheer size will make a statement on the streetscape, if not the waterfront and skyline.

Michael Cantor, who is not part of the Sherwin-Williams search team, but as managing director of Allegro Real Estate Brokers & Advisors heads a Cleveland company that has run many headquarters engagements, said there are at least a dozen intriguing potential locations downtown.

But one overshadows all the others.

“Public Square is probably the highest-profile site you could get for it because it is downtown,” Cantor said, referring to the parking lot on the west side of the square where the late Richard E. Jacobs planned to install a 60-story skyscraper. After anchor tenant Ameritrust Corp. was purchased by what’s now KeyCorp. in 1991, the project was dropped. The site since has had a decades-long run as a parking lot.

Ron Sarstedt, the principal of Elements, an architects studio in Cleveland, said if Sherwin-Williams built on the Jacobs site it would provide a missing “fourth wall” for the recently renovated Public Square. The addition of a monumental building there could create a roomlike dimension to the city’s one-time village green.

However, that site would require a skyscraper, no doubt a high-rise, Sarstedt said, to create a building with efficient floor sizes. Moreover, such a skyscraper would require substantial parking to service it, which might be surfaced on the west side of West Third Street between Superior Avenue and West St. Clair Avenue on the 5-acre parking lot mostly owned by Weston, the Warrensville Heights-based real estate owner and developer.

The original Jacobs plan for Ameritrust called for converting most of the vast parking field as a massive parking garage to serve the tower’s needs.

In the years since, Weston has consolidated its ownership of the superblock and in 2015 advanced a plan for multiple apartment and office buildings spanning the site. However, that plan never proceeded. Weston has declined to comment on why it did not proceed with even the plans for an

Correction JJA page one, Oct. 14 article in Crain's Cleveland Business on The SherwinWilliams Co. incorrectly identified the speaker in a video on its site search and two items in the statement. Sherwin-Williams spokesman Mike Conway appeared in the video, in which he cited the company's global expansion as one of the reasons it embarked on a search for a new global headquarters.

P003_CL_20191021.indd 3

initial 30-story apartment building on the block’s northwest corner.

One potential theory among insiders is that Weston sat on the site — meanwhile putting apartments in The Standard nearby — because another opportunity came up. Some believe that was Sherwin-Williams’ rumored search for a new corporate headquarters, which ended up being put on hold by its purchase of Valspar Inc. in 2017. Sherwin-Williams never confirmed that aborted search. This time, however, the paint-maker announced its site search publicly on Sept. 12.

The company declined to comment on the specifics of the size and footprint of a potential consolidated research center and global headquar-

ters. Since its current headquarters is an older building with 900,000 square feet, the new building might be smaller because corporate requirements per staffer have declined dramatically. However, it also would include an unknown amount of space for expansion or nearby future construction.

Another heart-of-the-city site might be on the south side of its current headquarters, on Huron Road near Ontario Avenue.

Two sources familiar with the situation, who spoke on grounds they not be identified, said Bedrock Real Estate, the real estate arm of Cleveland Cavaliers owner Dan Gilbert, has pitched to Sherwin-Williams an option for a headquarters on the parking lot serv-

ing the Bedrock-owned Avenue Shops at Tower City. The property is technically owned by an affiliate of JACK Cleveland Casino, Gilbert’s casino venture housed nearby in the former Higbee Building, 100 Public Square, and was originally a potential site for construction of a new casino. (Ken Till, Bedrock vice president for Cleveland development, declined comment.)

That parcel could accommodate three buildings with a total of as much as 900,000 square feet of office space, according to a massing study done as part of Cleveland’s bid for Amazon HQ2. The site also borders Canal Road, where Sherwin-Williams’ research center is located. The paint-maker also owns a vast riverfront parking lot that’s

east of the research center and other land owned by the casino that stretches south around Collision Bend.

Sarstedt independently suggested the area south of the current headquarters as a potential site.

“The first time I saw how much land there is on the south side of Terminal Tower (and the Sherwin-Williams headquarters) in the 1970s, I was struck by how cosmopolitan it was and what a great site it was,” Sarstedt said.

“Sherwin-Williams could do multiple buildings along there with varying heights from low-rise research space to midrise for a couple different functions and a high-rise for accounting and management functions.”

SEE HQ, PAGE 21

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Lending leaders

jnobile@crain.com @JeremyNobile

Huntington Bank continues to dominate in SBA lending both in Ohio overall and the Cleveland region itself. Nationwide, Huntington is the leading lender by volume and is third in total dollars lent out.

Annual lending through the U.S. Small Business Administration’s flagship 7(a) and 504 loan programs fell across the country in fiscal year 2019 and even more in the Cleveland region.

The lower SBA activity in the prior fiscal year — which ended Sept. 30 — may be due to a generally strong economy, a government furlough that temporarily shut down SBA offices and increased competition among banks, as well as pressure from its nonbank counterparts.

The Cleveland SBA district processed 1,480 loans last year (down 18.2%), totaling $412.6 million (down 9%). Those drops follow five years of stable lending activity.

“The agency experienced a fiveweek shutdown at the end of December. We were unable to approve loans during the federal government shutdown. Some of that lost volume was made up, but not all of it,” said Gil Goldberg, director of the Cleveland SBA district, which covers 28 northern Ohio counties. “On the positive side, the economy was generally doing well in fiscal year 2019. This meant that our lenders felt more comfortable in doing loans conventionally and did not need our support as much as they needed it in the past.”

By a wide margin, the market leader in SBA lending in this region continues to be Huntington Bank, which made 896 of those loans, totaling $128.9 million. That’s more than 60% of all loans and 31% of all dollars lent out in the Cleveland district.

“In times of great prosperity, we use the (SBA) program to help businesses start up, to grow and expand when they’re relying on projections, to supplement a collateral shortfall and to help bridge the transition from one to another through acquisitions,” said Maggie Ference, Huntington’s SBA program director, explaining the bank’s approach to the SBA program.

“If the economy slows, we will see more refinances of conventional debt that was structured too aggressively

Bank name Huntington National Bank

Total loans

Total $ loaned

896

$128,916,000

Growth Capital Corp.

57

$3,857,000

US Bank

44

$6,185,000

KeyBank

42

$19,630,000

PNC Bank

35

$5,156,000

Fifth Third Bank

29

$7,027,000

Citizens Bank

21

$4,919,000

Consumers National

20

$8,375,000

Independence Bank

19

$2,775,000

JPMorgan Chase Bank

19

$4,953,000

SOURCE: U.S. Small Business Administration, Cleveland district

for a company who is now suffering from lower top-line revenue, consolidation of balance sheets and to help with impacted appraisal values.”

She said the drop in SBA activity largely was expected because of the state of the economy.

“We are seeing some stabilization in the utilization of the program, which has led to numbers dropping for the first time in nine years, as well as continued economic health keeping conventional options available for steady companies nationwide,” Ference said.

Across the country, there were about 58,000 total SBA loans made in fiscal 2019 (down 12.4%), totaling $28.07 billion (down 6.8%), according to federal data.

At 3,594, Huntington leads all other banks in the country in terms of total loans issued, and it ranks third in terms of total dollars lent out, at $640 million.

At $1.3 billion, the top SBA lender by dollars is North Carolina-based Live Oak Banking Co. (SBA lending is its specialty.)

In Cleveland, the top SBA lenders behind Huntington include nonbank lender Growth Capital Corp. (57 loans totaling $3.9 million), U.S. Bank (44 loans, $6.2 million), KeyBank (42 loans, $19.6 million) and PNC Bank (35 loans, $5.2 million).

Economic takeaways In fiscal 2018, the Cleveland district saw the most loans ever made to “new” businesses (65%) versus existing ones. In the past year, “new” businesses made up just 26% of loans.

Goldberg said that was largely due to a number of baby boomers selling their companies in fiscal 2018. In the SBA program, loans to a “new” company include those made to new owners of an existing business.

The makeup of loans issued by industry is relatively consistent. Nonfood service industries continue to draw the most loans (35%), followed by transportation (16.5%), construction (16.4%), food services (11.8%), retail (9.1%), manufacturing (8.2%) and wholesale (3%).

SBA lending to manufacturing was down from the prior year (when it was 9% of all loans), falling more than other sectors, which could be a sign of the industry’s plateauing growth.

Bill Adams, senior economist covering Ohio for PNC Financial Services, noted manufacturing in particular has been slowing in general and has become more conservative with credit needs in response to global trends.

SEE SBA, PAGE 18

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PA G E 5

Zirks only sells products via ‘free’ warehouse — the water

By Rachel Abbey McCafferty rmccafferty@crain.com @ramccafferty

Zirks wants to be a different kind of distributor.

The new company imports items from overseas. No surprise there. But the difference is in when they make those products available to customers: just while they’re on the water.

“It’s a totally different way to think about how to import commodity items,” said president and CEO Kirk Zehnder.

Zirks, which launched Sept. 3, is based on input Zehnder had long heard as president and CEO of Earnest Machine in Rocky River, where Zirks is based. Earnest Machine makes fasteners, but also imports and distributes them. On the import side, long lead times have been a persistent challenge, Zehnder said.

He was interested in growing the business by serving customers who needed more product than Earnest Machine typically carried. Earnest Machine has focused on quick turnaround of lower-volume fasteners, while the Zirks model will focus on high-volume commodity parts. If there’s leftover inventory from a Zirks shipment, those are products Earnest Machine should be able to sell to its existing customers.

Traditionally, creating a larger-scale import business would have meant investing in warehouse space, distribution centers and inventory, as well as additional employees and systems.

“And that looked like about a $100plus million investment, and also a pretty dumb idea,” Zehnder said.

He wanted to find a way to sell volume commodity fasteners faster without those expenses. His idea was

to sell parts while they are on the water, being shipped to the U.S. “So when the parts leave Taiwan and make their 20-, 28-day journey over here, that warehouse, if you will, is free,” Zehnder said.

Customers can only order parts once they’ve been put on the ship, and Zirks will ship products directly to those customers once the items reach port.

The approach could save time and money for Zirks and for customers.

Companies that would have

“It’s a totally different way to think about how to import commodity items.”

— Kirk Zehnder, Zirks president and CEO

bought and shipped a pallet on their own can save money because Zirks is buying in bulk. In terms of time savings, if a customer places an order in the traditional way, it could take about 22 weeks before they receive their parts. Since Zirks only allows orders while parts are on the water, when potential delays are minimal, customers can receive their parts within five weeks — less if they wait until the tail end of the order period.

Zehnder said he hasn’t come across other companies using Zirks’ exact model, but James Fleming, program manager at the Institute for Supply Management in Arizona, said this approach and others like it are becoming more popular as technology adds transparency to the supply chain. That technology might include the use of sensors or other Internet of Things-enabled devices.

“You really have a good sense of

where products are located, almost at any given time. Or you have the capability of knowing,” Fleming said.

He’s seen companies starting to take advantage of these kinds of capabilities in the past five to 10 years, with the technology now reaching a scale that smaller companies can more easily access.

Ultimately, this allows companies to streamline their business models, saving on overhead costs like warehousing and inventory, Fleming noted. It’s a more strategic approach to supply-chain management.

As of early October, Zirks had four parts on the water that it was selling.

With it being a brand-new offering, Zehnder’s expectations were low, but a customer quickly bought up half of the container for the first product Zirks was shipping and the full container for the second product. That “far exceeded” the company’s initial sales expectations, Zehnder said.

He plans to expand Zirks’ product offerings in the coming year, adjusting to customer demand. The original idea was to help companies with their gap or fill-in buys, giving customers an option if a shipment was late or if usage on a project was miscalculated. But Zirks could adopt more of a planned supply-chain model going forward. The company has been asking customers what products they’d like shipped in this fashion and may look into shipping certain products regularly if there’s enough customer demand.

To start, Zirks is only delivering to customers in the U.S., but Zehnder said he’s looking to expand that to Europe in the future. For now, Zirks will stay focused in the fastener space, but Zehnder said he’d eventually like to expand to the larger industrial market.

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CRAIN’S CLEVELAND BUSINESS

Opinion Personal View

Manufacturing the next generation of Cleveland talent

By Brian McDonald

Northeast Ohio manufacturing is enjoying a resurgence, powered by demand and innovation. But alongside this resurgence lies a mounting challenge facing nearly every manufacturer: attracting and retaining skilled talent, especially here in Cuyahoga County, where 1,500 to 2,000 manufacturing jobs have gone unfilled.

However, there are steps employers can take to put the right tools and people in McDonald place to ultimately propel their companies — and the Cuyahoga County manufacturing industry — forward.

Partner with higher education

Editorial

All in In his Oct. 10 State of the City address, Cleveland Mayor Frank Jackson offered a variation on a previous theme, telling the audience, “Cleveland is a successful city, but it is not a great city.”

To get to great-city status, he said, we have to slay “the beast” — economic and social disparities that exist in the city (and the region) and are, based on new Census data, getting worse, even in a time of economic prosperity. As Cleveland.com noted, Cleveland’s overall poverty rate for 2018 was 33.1%, up from 27% in 2006, and for children, it rose to 50.5% from 41.9%. In suburban Cuyahoga County, the overall rate of 10.9% in 2018 was up from 9.3% in 2006, while suburban child poverty rose to 14.8% from 13%. Countywide, about 216,000 people are in poverty — 124,000 in Cleveland and 92,000 in the suburbs.

The government’s standard of what constitutes poverty: an income of less than $13,064 for a single person, and less than $20,231 for a single parent with two children. Be thankful if you can’t conceive of what it’s like to live on so little money.

While unemployment certainly is a factor in poverty, survey data collected in May by the Cleveland-based Center for Community Solutions found that about half of respondents in poverty were working full- or part-time. A big problem is that, as a 2018 Policy Matters Ohio report put it, “too many jobs pay too little.” But the Center for Community Solutions also found that nearly one in five respondents said they could not get enough hours at work, and more than a quarter said their job had no room for advancement. (Business owners, take note of both and look closely to see what role you could play in improving the situation.)

It’s axiomatic to note that higher wages are needed to lift people out of poverty, but we need a more dynamic economy to create greater numbers of such jobs, and then we need a stronger agenda, focused on job training, improved schools, quality housing and access to affordable and reli-

able public transportation, to build on good work already being done in the community.

One encouraging sign came last week, when new Greater Cleveland Regional Transit Authority CEO India Birdsong outlined a vision for the agency that included a refocusing on low- and middle-income riders.

“Our goal will be to make sure that we give back to the community, we connect communities, and ... to understand the lower-income to mid-income resident is our bread and butter,” Birdsong said, according to ideastream, which noted an analysis conducted over the summer “shows 63% of RTA bus riders were from low-income households, defined as those with incomes of $27,000 or less.”

Higher-quality service for that group is a key factor in connecting them with better work opportunities.

An inescapable component in this is race, as poverty disproportionately affects people of color. Two Cleveland organizations, First Year Cleveland and The YWCA Greater Cleveland, on Nov. 8 and 9 are hosting a summit called “400 Years of Inequity: A Call to Action,” that explores the legacy of slavery on racial disparities and looks at ways the community might become more equitable. The stakes are high: Research institute PolicyLink estimates that raising the average earnings of people of color to match those of whites would increase the region’s GDP by 12% per year.

There are no easy, or fast, answers to our community’s poverty problem. Some answers that might exist can only be addressed at the state or federal level. (It would help at least if the state didn’t get in the way, as it did in fighting the city of Cleveland’s Fannie Lewis Law, which required that 20% of total construction hours be performed by residents on publicly funded projects costing more than $100,000. The Ohio Supreme Court overturned the law; the city has asked the court to reconsider.) The first step to a serious reduction in poverty, though, is to realize we all have a stake in it, and to make it our first priority.

Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com)

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Managing Editor:

Scott Suttell (ssuttell@crain.com)

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Read Crain’s online: crainscleveland.com

Over the past few years, the manufacturing industry has undergone a seismic transformation. Though traditional assembly lines remain, the industry is moving rapidly toward jobs with irreplaceable human skills, such as creativity, ingenuity and critical thinking.

Modern manufacturing has evolved to now require a broader set of skills, including product design, engineering and distribution, technology maintenance and information security, science and even finance. Employers should work to fill these emerging roles through in-house training programs or partnerships with local community colleges.

Some manufacturers are also exploring new types of apprenticeships, such as adult training classes with a job offer upon completion. For example, in Cleveland, there are programs at Cuyahoga Community College and the Manufacturing Advocacy and Growth Network (MAGNET). These partnerships are opening doors to students not previously encouraged or explored.

Embrace technology and digital skills Many experts agree a talent shortage exists due to a widening skills gap. In 2018 alone, the United States manufacturing sector added 264,000 jobs, representing the highest numbers of new workers since 1988. But according to a study from the Manufacturing Institute and Deloitte, by 2028, some 2.4 million jobs within the sector will go unfilled, putting $454 billion in production at risk. In Cleveland, according to a report by Manufacturing Works, only about 300 students are graduating from manufacturing programs each year.

To offset the labor shortage and yield the highest level of productivity, the industry should also embrace a work environment that blends advanced technology and digital skills with uniquely human skills. Automation has created thousands of new positions to design, engineer, manufacture, market, distribute, install and service these technologies, and employees who are able to navigate changing systems are in high demand. These types of future-proof jobs will ensure the manufacturing industry can be a source of employment for years to come.

Offer a better work environment To retain skilled workers, manufacturers must take a variety of steps, from improving wages and benefits to developing their current workforce through promotions and training.

SEE MCDONALD, PAGE 7

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10/18/2019 3:02:37 PM

CRAIN’S CLEVELAND BUSINESS

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PA G E 7

THE GRASS IS GREENER ON OUR SIDE. From the Managing Editor

The Akron Art Museum is on its game in exploring digital culture Are you game for something a little different?

A just-opened exhibition at the Akron Art Museum, “Open World: Video Games & Contemporary Art,” offers beautiful, thought-provoking imagery and something of a portal for your mind to make various connections: how games inform and reflect our culture, how Scott they intersect with art and how art Suttell connects with a digital world that’s increasingly gamified, through the apps on our phones to the rise of esports on college campuses. (Appropriately enough, two schools in the museum’s backyard, the University of Akron and Kent State University, are big esports players.) The art itself tackles key issues of the day, including economic equality and the rise of consumerism in shaping identity.

More than 164 million Americans play video games, according to data from the Entertainment Software Association, which reported that video game sales in 2018 hit a record $43.4 billion. Despite that economic clout, and the cultural influence that comes with it, video games have rarely been examined as a major influence on contemporary art.

“This hasn’t been a hugely popular subject,” said Theresa Bembnister, who curated this exhibition and last week was named curator of exhibitions at the museum. But it has been “rattling around the back of my brain since about 2004,” Bembnister said, back when she was a critic for an alt weekly newspaper in Kansas City and was reviewing a show that featured a game inspired by the siege of a compound belonging to a religious sect in Waco, Texas.

Bembnister said she didn’t grow up playing video games — her family was strict about screen time — but she has become fascinated by the visual aspects and world-building of games, and how they “reflect the world we see today.”

As the museum notes in its description of the exhibition, the 23 artists from around the nation and around the world whose work is on display “use digital games to create meaning through imagery, music, sound effects, animation and narrative. The rules governing the experience of playing a video game can express a viewpoint and encourage critical thinking or empathy by directing the player’s attention to systems at work within the real world.”

The exhibition presents digital artworks — video games, video game modifications and what the museum calls “game-based performances and interventions” — alongside works in traditional media such as painting, sculpture, textiles, prints and drawings. In short, just about anything you can think of, all of it visually striking.

You might not even need to be a gamer to recognize some of the influences on the pieces in “Open World,” given the broad cultural recognition of video game franchises such as “Super Mario Bros.,” “The Legend of Zelda,” “The Sims” and “Final Fantasy.”

Museums in recent years have placed an emphasis on engaging broadly with the community, and this exhibition offers a great example of that.

MCDONALD CONTINUED FROM PAGE 6

Many manufacturers are also revisiting rigid hiring rules, trading job requirements for previous experience, making room for parttime workers and welcoming retired workers back to their companies. According to a Deloitte study, some auto manufacturers

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Tabor Robak’s “20XX” exhibition is on display at the Akron Art Museum. (Contributed photo)

As part of “Open World,” the Akron Art Museum on Saturday, Dec. 7, will present “Open World Arcade,” a daylong juried arcade of independent video games and tabletop games from developers, students and game creators. The event will run from 11 a.m. to 5 p.m.

Games presented in the arcade will be judged by a panel of museum staff and video game professionals “based on novelty, professional polish, aesthetics, quality of game experience and ‘wow factor,’ ” the museum says.

As of last week, just prior to the application deadline for “Open World Arcade,” Bembnister said the museum had received more than 70 applications. She added she was thrilled to receive so many, but she wasn’t surprised, given the interest in esports at Kent State and the University of Akron, and the strength of design programs there and at the Cleveland Institute of Art, which has a fast-growing animation program that over the summer benefited from CIA’s investment of about $1.5 million to renovate and equip a new space. (More on that next week, from education reporter Rachel Abbey McCafferty.)

Bembnister said the Dec. 7 event serves to deepen the experience of the exhibition, as well as to expand the museum’s audience and position it to “support the work” of game developers.

The digital culture on display at the museum focuses on games, but the universities’ commitments to building strong digital programs reflects real-world concerns.

We got a glimpse of that last week, in the Digital Futures Conference at Case Western Reserve University, in which experts discussed how their work with emerging digital technologies is bringing the Industrial Internet of Things to manufacturers of all sizes — a key development for Northeast Ohio as it looks for ways to create a more dynamic economy.

“We’re speeding things up,” said Subbian Govindaraj, system architecture manager at Rockwell Automation’s Northeast Ohio operations, in the use of digital technologies that, as Crain’s reporter Jay Miller wrote last week in covering the conference, “give manufacturers increased operational productivity, improved equipment management and the ability to bring products to market faster.”

The exhibit runs through Feb. 2, 2020, so you have plenty of time to catch it. And like a lot of video game characters, it has a second life: The exhibition next year will travel to the Currier Museum of Art in Manchesterm N.H., and the San Jose Museum of Art in California.

are asking retiring workers if they would consider coming back for short-term project work.

While Cleveland’s manufacturing challenges won’t be resolved overnight, these strategies can help local manufacturers find the employees to grow. To overcome these labor challenges, employers must provide training, technology and leadership to empower Cleveland’s manufacturing workforce to

effectively compete and excel.

While we can’t predict what the future of manufacturing may entail, talent will continue to be a key differentiator as manufacturing companies compete to be employers of choice.

McDonald is the market executive for global commercial banking at Bank of America Merrill Lynch in Ohio.

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CRAIN’S CLEVELAND BUSINESS

Facing up to an ongoing legacy Local organizations to hold summit examining connection between slavery and today’s racial disparities

By Lydia Coutré lcoutre@crain.com @LydiaCoutre

Four hundred years after the first ship holding enslaved Africans reached port at Jamestown, Va., two Cleveland organizations are hosting a summit to examine the connection between this legacy and today’s racial disparities.

Since August of 1619, millions were forced into slavery, an institution that ultimately helped build the economic foundation of the United States.

First Year Cleveland and The YWCA Greater Cleveland are hosting

“400 Years of Inequity: A Call to Action,” on Nov. 8 and 9 at the Cleveland Public Auditorium at 500 Lakeside Ave. East.

The two organizations believe that the inequitable social conditions forced upon slaves and their descendants are the primary explanation for today’s racial inequities.

Considering 246 years of slavery and 99 years of Jim Crow laws, “you are really talking about 350 years of purposeful, intentional oppression based upon race, the color of your skin,” said Margaret Mitchell, president and CEO of YWCA Greater Cleveland.

After slavery ended, the mistreatment of African Americans contin-

About the summit First Year Cleveland and the YWCA Greater Cleveland are hosting “400 Years of Inequity: A Call to Action.”

When: Nov. 8 and 9 7 a.m. – 5 p.m.

Mitchell

James

ued, codified at every level into laws, policies and practices designed to accommodate Jim Crow. Circumstances remain unfair for African Americans, which is demonstrated by racial disparities in health, economic security, housing, the justice system and beyond.

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Dr. Arthur James, who currently heads the Kirwan Institute for the Study of Race and Ethnicity at Ohio

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State University, said it’s critical to understand that these disparities are not natural; they’re manmade.

They exist, he said, because this is the way society was cre-

ated.

“The only good news in that is if we made it that way, then we can unmake it,” said James, who also helped organize the summit and will be a featured speaker.

1619 through the end of the Jim Crow era represents 86% of the historical African American experience, James noted. Even since then, many would argue, the playing field has not been equal.

“How can we expect there not to be disparities?” James asked. “It’s that imbalance in opportunity that, in my opinion, accounts more for the disparities that we see in this country than anything else.”

As for work being done already in the region, Mitchell pointed to Cleveland Neighborhood Progress’ work in the Racial Equity Institute and United Way of Greater Cleveland’s move to identify and name racism as a deeply rooted issue in the community as it focuses on addressing poverty.

“I have been amazed, not being a Clevelander, at just the growth, particularly in the last five years I would say, as a community,” Mitchell said. “I think there has been a lot of work done by great organizations and individuals, individual work to recognize that it’s time to begin the process of dismantling the nuances that we have remaining in place that are negatively impacting descendants of slaves.”

Poverty exists throughout the three counties that United Way serves here, but the majority of those experiencing poverty are people of color, said Augie Napoli, president and CEO of United Way of Greater Cleveland, which is a sponsor of the summit.

If people don’t buy the need to erase disparities on a moral ground, which they should, Napoli said, they can buy in on economic grounds.

He cited a study which found that raising the average earnings of people of color to match those of whites by closing gaps in health, education and opportunity would generate an additional $1 trillion in earnings (a 15% gain). That would translate to an additional $2.7 trillion in economic output or gross domestic product. Such a boost to the GDP would be estimated to reach $8 trillion by 2050, according to the W.K. Kellogg Foundation.

In Northeast Ohio alone, racial equity would increase the region’s GDP by 12% per year, PolicyLink estimates.

The two-day summit will feature speakers, skills-building and educational breakout sessions, performances, exhibits and an opportunity to connect with people who share a commitment to equity and justice.

“In this country, we won’t resolve racism until white people decide they’re going to resolve racism, because if it was up to black people … it would have been resolved a long time ago,” James said.

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CRAIN’S CLEVELAND BUSINESS

Focus

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The Center for Functional Medicine’s growth surge led to a move into a new 17,000-square-foot space on Cleveland Clinic’s main campus. (Contributed)

HEALTH CARE

SURPASSING EXPECTATIONS

Five years after its opening as the first of its kind in an academic medical center, Cleveland Clinic’s Center for Functional Medicine has seen explosive growth dealing with the social determinants of health

By Lydia Coutré lcoutre@crain.com @LydiaCoutre

Five years ago, when opening its Center for Functional Medicine, Cleveland Clinic quickly confirmed its theory: Patients were eager to find a new way to feel better.

The center, dedicated to the holistic treatment of the root causes of health problems, aims to do just that.

The first of its kind in an academic medical center, the Clinic’s center was on the forefront of a trend of providers and institutions looking into offering functional medicine, which accounts for the ways lifestyle factors — such as nutrition, sleep, exercise, stress, relationships and genetics — contribute to disease.

“Just looking back five years ago, where we started and today, how we’ve grown today is beyond, I think, what any of us believed,” said Tawny Jones, administrator for the center.

Full on its first day in September 2014, the center quickly outgrew the six exam rooms dedicated to it.

From 900 visits in 2014 after it opened in the fall to roughly 26,000 visits last year, the center has seen explosive growth. In January 2017, it moved into a new 17,000-square-foot space on the Clinic’s main campus and opened a second location in Chagrin Falls. This year, the center added a third location in Lakewood.

Since opening, the center has

P010_011_CL_20191021.indd 10

The Clinic added a second functional medicine location in Chagrin Falls and already has a third planned for Lakewood. (Contributed)

served more than 12,100 unique patients at three locations. It’s also nearly quadrupled the number of caregivers dedicated to it, from 10 in 2014 to 38 today.

Nationally, there’s a growing desire among institutions to offer functional medicine programs, said Amy R. Mack, CEO of the Institute for Functional Medicine (IFM), a national

“Across the country, there are institutions that are coming to us and saying, ‘We are ready to open up a functional medicine center; help us figure out how to do it.’ ” — Amy R. Mack, CEO of the Institute for Functional Medicine

nonprofit that offers continuing medical education in functional medicine.

“Across the country, there are institutions that are coming to us and saying, ‘We are ready to open up a functional medicine center; help us figure out how to do it,’ ” Mack said.

To date, IFM has trained 15,000 practitioners. It also offers a sevencourse certification in functional medicine. In the past five years, the field has grown from 216 to more than 1,100 certified practitioners.

Mack said she anticipates that next year there will be 5,000 who are either certified or on their way to becoming certified as functional medicine practitioners.

As more providers look to offer this type of care and more patients turn to it to feel better, the industry is nearing a tipping point.

“One of the things that we see happening with some functional medicine concepts is they get adopted into standard of care and they no longer are called functional medicine but the concept is embraced,” Mack explained. “As concepts of functional medicine are pulled into or adopted by traditional standard of care, that’s a win.”

Dr. Mark Hyman, head of strategy and innovation for the Center for Functional Medicine, said he knew there was a huge demand and need for functional medicine. While hopeful, he didn’t realize how much the center would be welcomed into the Cleveland Clinic community. Hyman said the most exciting piece for him is the increased collaboration with other institutes and departments that are working together to solve difficult chronic disease problems.

Though the center started as an incubator under executive administration, it was fully integrated into the organization Oct. 1 by joining Cleveland Clinic Community Care, a population health unit that encompasses physicians and other providers from a variety of primary care areas. The move offers the center a host of opportunities to work with population health and on value-based care, Hyman said.

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“The burden of chronic disease is so great and the acute care model of treatment, which we’re so good at here at Cleveland Clinic, isn’t really suited to dealing with chronic diseases, which are mostly driven by diet and lifestyle,” he said. “So I think it’s a real exciting moment where we can have the support and the infrastructure of one of the biggest institutes in the entire Clinic to help us to grow and help us to advance our research mission and our community-based work.”

The center doesn’t have restrictions on the type of patients it will see. Some of the most common conditions seen in the practice include autoimmune disease, digestive disorders and weight management.

In addition to one-on-one visits, the center also offers shared medical appointments in which eight to 10 patients battling the same type of condition meet for a group visit. Jones said these shared appointments, as well as the virtual visits offered, account for about 38% of the center’s appointments with practitioners.

The health care system has long been structured for providers to diagnose a condition and treat it with the latest drug or intervention, rather than looking at why the patient has the condition or disease and what factors — such as lifestyle, nutritional or behavioral change — contributed to it, Jones said.

“All of that is not embedded in the medical school curriculum at this point, so it’s been very difficult for practitioners to adopt this model of care when the system is not designed for the functional medicine type of intervention,” Jones said. “Fortunately, we’re at a place where one, Cleveland Clinic recognizes the value that all of these other components play into health. And we’re a leader, we’re a model for other health care systems and services to really recognize that these are important components of health in general, and we need to invest in the educational training, we need to invest in the community engagement, we need to invest in our patients in a whole different way.”

Community outreach is a primary goal for the center, Jones added. Since 2015, the center has offered the Daniel Plan, a faith-based wellness program that has supported more than 1,100 individuals in 28 churches.

More recently, the center has partnered with the Langston Hughes community center in Cleveland to offer a group of patients there access to a health coach, dietitian and physician assistant through a 10-week pilot program at no cost to the community members.

“We’re actually ... trying to raise awareness that this model of care is

P010_011_CL_20191021.indd 11

necessary — the model of care meaning the services we offer: lifestyle and behavior change is necessary; nutrition counseling is necessary in order to help patients understand how to self-manage their conditions,” Jones said.

She added that the center didn’t know what to expect, but patients have “completely embraced” the program, attending regularly, engaging and asking thoughtful questions about their health.

Jones said the plan is to expand this offering to other community centers and continue to support the Langston Hughes community. She said she hopes it will serve as a model for the Clinic, as well as for other health care systems, to consider whether the group visit model is an effective way to reach the community.

Mitchell Wax, a 73-year-old Lakewood resident, had struggled to lose weight most of his life. After two separate bariatric surgeries, he still wasn’t losing enough weight, so he turned to a program at Duke University, which he attended on and off for a couple of years. Eventually, with his diabetes out of control, they told him to go on a low-carb, high-fat keto diet. He returned to Ohio, unsure of how he would maintain his diet, until he found the Center for Functional Medicine last year.

He enrolled in a 10-week program at the center, and took it a second time to make sure he learned everything. Over the past year, he’s lost 76 pounds, thrown away his short-acting insulin, cut his long-acting insulin use by more than half and his blood sugars are down to normal.

Prior to his own experience with functional medicine, Wax said he wasn’t very interested in it, but he is now a huge advocate for the practice.

A psychologist, Wax now talks to his patients about the benefits of functional medicine.

“Learning about the health benefits for me personally has just been eye-opening,” he said. “What they said was going to happen actually happened. The biggest thing is learning how not to be hungry. ... Not being hungry is the biggest gift in the world.”

The burden of chronic disease is increasing, with one in two Americans suffering from a chronic disease, Hyman noted.

“Our current approaches don’t really work that well,” he said. “I mean, we’re just sort of mopping up the flow while the sink’s overflowing. We need to get to the root cause, and functional medicine is all about dealing with the causes and dealing with the social determinants of health and dealing with the food-driven causes of health.”

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CRAIN’S CLEVELAND BUSINESS

HEALTH CARE

Medina finds healthy ROI with wellness push Impactful Medina Hospital program for city workers expands to Medina schools and residents

Two Medina residents use the ellipticals as part of Cleveland Clinic Medina Hospital’s community wellness program. (Contributed photo)

municipal staff in 2014. He said about 70% of the city’s 157 employees take part in the program, which requires them to undergo annual biometric testing and participate in at least three health-related seminars or activities, like getting a flu shot or attending yoga classes.

“If they run a 5K, for instance, we will give them credit for that,” the

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mayor said. “If they like to bike, it can be a cycling event. We try to make it as accommodating for them as best as we can.”

Employee participants, in return, get a 4% discount on their portion of health care premiums.

Hanwell said in the first years of the wellness program, premiums actually went up. Most of the city’s em-

+

+

Medina mayor Dennis Hanwell said there are 375,000 reasons — and counting — why he believes workplace wellness programs can deliver a return on investment for employers.

That’s the amount his city has saved in the last three years, in the form of lower insurance premiums it pays on behalf of employees. Medina’s share of health care premiums fell 8%, from $2.5 million in 2016 to $2.3 million in 2018.

“Then, in 2019, we got another 4% reduction, so that’s a total of 12% savings in three years,” Hanwell said.

“Most places are seeing somewhere between an 8 to 12% increase — last time I looked at survey data — so to be in a position of not only not seeing increases but having a reduction in premiums is a pretty significant accomplishment.”

Hanwell attributed the savings to an innovative partnership with Cleveland Clinic Medina Hospital.

The duo officially launched an incentive-based wellness push aimed at

least get established with a primary care physician.”

Another big benefit, she said, has been getting the “Just move” message disseminated on a much larger platform. Those who don’t exercise regularly tend to become immobilized at the mere thought of a structured physical activity. Once they hear they don’t have to run a marathon, however, most people will find something they like to do and start doing it, Rudolph said.

She estimates 175 city, school and county employees and community members are now actively engaged in the wellness initiative.

While there are no empirical data just yet to suggest the community at large is responding as well to the health interventions as city employees did, Hanwell is more than happy to share anecdotal evidence.

The mayor noted that one lowknee amputee, who had essentially been homebound since losing his lower legs, started walking after joining the program and ended up getting himself fitted for prostheses that now allow him to run.

In another case, a young mother was encouraged to have her first mammogram during a community health screening. When she did so, a cancerous mass was found that would have developed into something much more dangerous down the road.

One elderly participant who uses a walker has trekked her way to doing 2 miles a day, leading to decreases in her weight, blood sugar and blood pressure.

Hanwell uses that last one as an example to motivate others.

“If she can do it with a walker, what about you?” he said.

++ ++ +

++

clbfreelancer@crain.com

ployees, he was surprised to learn, had not been seeing a physician regularly. Many did not have a primary care doctor.

So the initial health risk assessments — which measure such things as body mass , blood pressure, cholesterol and glucose — uncovered a number of underlying issues, such as diabetes, or characteristics that put employees at a higher risk for developing chronic diseases.

“We found that more than a quarter, 26%, of our staff were at high health risks from a variety of factors,” Hanwell said.

Once those patients were educated and the proper treatments or interventions were put in place, however, the city began to see improvement in its employee health profiles as well as its premium fees. Its “at-risk” population fell to 12% by 2018, according to the mayor. In addition: JJEmployees with high cholesterol dropped from 12% to 7%.

JJThe percentage of overweight staff tumbled from 35% to 22%.

JJObesity was cut from 35% to 25%.

Chandra Rudolph, wellness director at Medina Hospital, said early success with the city prompted the hospital to expand the wellness program to the schools, where it is being piloted with certain employee groups, and to county health department workers. It also added a community program designed to offer many of the same health screenings, educational topics and physical activity encouragement, often free of charge, to Medina residents.

“The blood draw is typically the only thing community members are paying for,” Rudolph said. “It has motivated an awful lot of people to at

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HEALTH CARE

Health benefits a major stumbling block for startups Proposed legislation addresses difficulty entrepreneurs — especially women — have in obtaining health care

By Jay Miller jmiller@crain.com @millerjh

For entrepreneurs, especially female entrepreneurs, health care benefits can be a major hurdle to getting a young business off the ground, according to Charu Ramanathan, a Case Western Reserve University Ph.D. in biomedical engineering who has started three health care companies.

Lack of those benefits may contribute to the low rate of venture capital investments made to startups led by women.

That was an area of concern Ramanathan explored last month when she and 21 other female entrepreneurs met at the U.S. Capitol in September with Sens. Amy Klobuchar (D-Minn.) and Tim Scott (R-S.C.), who had just introduced the Enhancing Entrepreneurship for the 21st Century Act. Access to capital, especially for female and minority entrepreneurs, and the concentration of venture capital in coastal cities are among a number of factors that, along with the health issue, were discussed at the roundtable.

But Ramanathan, who was one of

“We just made our first hire (at one of her startups) and we had to tell him that, ‘You know what? You’ve got to go shop for your own benefits.’ ” — Charu Ramanathan, founder of three health care companies

20 women named by Crain’s in a feature on notable women in technology, said she was particularly interested in the part of the conversation about how startups, which may have

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to go shop for your own benefits,’ ” she said in a telephone interview after returning from Washington. “You know how critical talent is for the viability of a startup and you’re kind of starting far behind because you can’t even compete on things that really matter to employees. That has got to change because it’s ridiculous that that’s happening.”

The benefits issue is especially important to young, female entrepreneurs who may want to start a family, Ramanathan said.

“Motherhood is something a woman has to plan for if she wants to go out on her own,” she said. “And so there were conversations (at the roundtable) about moving your pregnancy down and I talked about freezing one’s eggs. These things are more exclusive to women and they are incredibly important life decisions.

Sometimes you have to make some very tough choices.”

In introducing their legislation, Sens. Klobuchar and Scott, who earlier this year started the bipartisan Senate Entrepreneurship Caucus, pointed to research showing that the rate of entrepreneurship in the United States has fallen to near a 40-year low. The act would require the Secretary of Commerce to study the underlying factors in what the senators called a “startup slump.”

The decision to hold a women’s roundtable on entrepreneurship was directly spurred by a report released in February by the Center for American Enterprise (CAE), a Washington, D.C., think tank. That study, “The Ascent of Women-Founded Venture-Backed Startups in the United States,” found that women represented 47% of the labor force and 36% of business owners in 2017, yet only 16% of the nearly $83 billion invested in U.S. venture-backed startups went to companies with at least one female founder, and just 2.5% went to startups with all-female founders. That’s even though the study found that, once funded, women-founded startups perform as well as startups with no women founders.

“It has been alleged that the venture capital industry has a sexist problem in terms of who they invest in,” said John Dearie, president and founder of CAE. “What this data indicates is that at the very least venture capitalists ought to look more carefully at startups led by women.”

Ramanathan is clearly an outlier, not only because she is a woman but because just 17% of the womenfounded startups that received 16% of venture capital first financings between 2005 and 2017 were in health care-related fields. And Ramanathan has founded or co-founded three such firms.

The first was CardioInsight, a noninvasive cardiac mapping system that she and co-founder and CWRU colleague Ping Jia began in 2005 and then sold to Medtronic for $93 million in 2015.

These days, she’s focusing on vitalxchange, a social network that connects people to information and to others with similar medical issues, and Lokyata, which offers a new kind of credit-scoring system to increase lending to people living in poverty.

“Charu is relentless,” said Aram Nerpouni, the CEO of BioEnterprise, the regional health and medical startup.

10/17/2019 11:27:14 AM

CRAIN’S CLEVELAND BUSINESS

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PA G E 15

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HEALTH CARE

Nurses at the forefront of health care innovation

By Douglas J. Guth

grants are available for nurses to fund expensive research.

“You also need leaders willing to be risk-takers,” Albert noted. “We always tell people they’ll make 30 mistakes in whatever idea they bring forward before they nail it. Nurses have to be cheerleaders in their own innovation.”

clbfreelancer@crain.com

Cleveland Clinic nurse Jill Byrne stands elbow-to-elbow with overheated surgeons in the operating room almost every day. Recognizing the potential negative impact of heat-related stress on patient care, Byrne designed a disposable cooling vest to ease her fellow clinicians’ sweat-soaked suffering.

Via a Clinic partnership with Cardinal Health, Byrne’s solution is now in use at hospital systems nationwide.

Considering the bigger picture, Byrne taking her idea from mind to market is emblematic of how the nursing workforce is playing a key role in driving health care innovation.

“In nursing, there’s lots of resourcefulness required,” observed Joel Colyer, director of product management and development at Cardinal Health.

“If nurses are dealing with the same issues over and over, they’re going to be thinking about products and processes to improve outcomes for patients and caregivers.”

Health care innovation has traditionally been the bailiwick of physician leaders, even as the number of registered nurses reported by the U.S. Bureau of Labor Statistics now outnumbers physicians by four to one.

However, the emergence of telehealth, remote monitoring and coordinated care has put the spotlight on the nation’s nurse population in both disruptive innovation and improvements to existing products.

Byrne, a Ph.D. student at Case Western Reserve University’s nursing school, designed the cooling vest to fit under surgical garments. Equipped with icepacks placed around the body, the disposable vest helps sur-

Byrne

Colyer

keting departments and other health care system constituents.

“There’s a recognition of having to be interdisciplinary,” she said. “Nurses are improvising and using creativity. That’s the nature of the job.”

Today’s nurses benefit from an era in which health care modernization is part of a hospital system’s revenue stream. Cleveland Clinic’s nursing innovation program encourages staff to submit ideas for intuitive processes, systems or devices, providing mentorship from colleagues with experience in nursing research. Internally produced innovations so far include an app that allows employees to track daily work activities and show department heads why their position should remain in the budget.

“In the old days, when nurses came up with ideas, their mindset was not to tell anyone,” said Nancy Albert, associate chief nursing officer of nursing research and innovation at the Clinic. “They didn’t think anyone would care, or that people would think their idea was stupid, especially if it was disruptive.”

The program today not only respects these brainstorms but guides nurses in their implementation, a shift from the days when “innovation” mostly pertained to educational methods rather than technology. Clinic nurse leaders push innovation among their teams, while state, federal and organizational

Cleveland Clinic nurse Jill Byrne designed this disposable cooling vest for surgical teams. (Contributed)

geons keep their cool in a stressful environment that requires several layers of protective clothing.

“It was an intuitive way to make them comfortable,” said Byrne.

Nurses as influencers Alleviating heat stress as a pain point could result in fewer needle-stick injuries, a significant hazard in the operating room, Byrne noted. While conducting research for her invention, the veteran nurse wrote papers on the benefits of a cool and comfortable surgical team, joining a national occupational research program to learn more about improving workplace practices.

More nurses are becoming vital participants in bettering patient outcomes, often acting as influencers and validators of new technologies. Byrne said the nursing community isn’t the closed group of decades past. Nurse leaders today are connected to mar-

Trusted Solutions.

Focused on You.

A clinical understanding Teresa Lee, chief government affairs officer and vice president of foundation relations for the Visiting Nurse Association of Ohio, said nurses are ideal champions for telehealth, which uses mobile technology to extend provider reach beyond traditional medical settings.

“Because nurses have a clinical understanding of what patients need and how care should be delivered, they are extremely well-positioned to ascertain which applications of telehealth can make sense in different situations, and exactly what kind of

information and interfaces are needed in health information exchange,” Lee said in an email.

Virtual and augmented reality are other disruptive areas where nurses can stand at the forefront, although Colyer of Cardinal Health sees more traction in updating the dimensional footprint of the operating room.

“It could just be a piece of equipment with a power cord that doesn’t get in the way,” he said. “There’s stories about nurses crawling underneath tables to disconnect equipment. There are many opportunities to improve pain points and map out procedures to make sure workflow isn’t interrupted.”

Albert said nursing schools are potential innovation incubators.

“Schools need to promote the value of having fresh eyes and solving problems in new ways,” she said. “As health care changes, we’re going to need more nurses thinking about innovation. It helps us as health care providers and helps our patients get better care.”

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PA G E 16

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CRAIN’S CLEVELAND BUSINESS

HEALTH CARE

Q&A: Jill Dietrich Director and CEO, VA Northeast Ohio Healthcare System While dual-enrolled at Case Western Reserve University for her law degree and MBA, Jill Dietrich discovered a passion for hospital administration.

Rather than practicing law, where she’d deal with individual clients and cases, she wanted to have a broader impact.

“What I noticed with hospital administration is that there were so many opportunities for process improvement,” Dietrich said, “and then not only when you identified an issue and were able to work on it, you had the ability to sustain that and then realize benefits from it, too. So it was much more fulfilling to me to be able to continually grow rather than do piecemeal work.”

After graduating from CWRU, Dietrich embarked on a career with the Department of Veterans Affairs, taking on various roles with increasing responsibilities in VAs throughout the country. Most recently, she was named the new director and CEO for the VA Northeast Ohio Healthcare System. She joined the Cleveland system Sept. 29 from the Dayton VA Medical Center, where she’d served as director for about a year and a half.

Crain’s sat down with her to discuss her new role. This conversation has been edited for clarity and length. — Lydia Coutré When you were in Dayton, you’d been there 18 months and this Cleveland opportunity came across the table. Why did you ultimately say yes?

I had just bought a house, and when I was approached with the question, my heart almost was in my stomach, because I’m like, “Oh my gosh, I just did this. I’m working so well with

everybody at the facility — you know, it was my first director job and I felt a great sense of loyalty that I didn’t want to leave. But I don’t think many people could have anticipated the departure and retirement of the previous director.

And I don’t think that this opportunity was going to come around very quickly again. This is one of the best VAs in the country: top-notch quality; one of the largest, great affiliations. And again, coming back to Cleveland, where I spent quite some time here in grad school, and to be able to come back and see the growth and revitalization of the University Circle district, and just Cleveland in general, I knew it was the right time to go.

Talk to me about what makes the Cleveland VA unique.

The Cleveland VA is unique for multiple different reasons. One, as I said, it’s one of the largest in the country. We have 18 sites of care, we have over 5,000 employees and we serve over 112,000 veterans a year.

We also are a 1A complexity facility, which is the highest complexity in the VA, which means that we provide

programs such as cardiac surgery.

And a wonderful research program as well. And when you look at not only the size of the medical center, the complexity of the medical center, and then look at the quality marks plus the patient and employee satisfaction marks, it was something to where Cleveland just really stood out. ... So just putting all of that together, Cleveland really is the perfect package. And with my previous connection here, I just couldn’t pass it up.

What are your short-term goals in getting settled and then your longer-term goals in what you can do with the facility?

So my short-term goals are really getting to know everybody and getting to know the organization.

This is a huge place, like I said.

Eighteen sites of care. We have 13 CBOCs or Community-Based Outpatient Clinics, so being able to get out, meet the employees and talk to them about their processes and the great care that’s already being provided here. So really just to familiarize myself with everything around.

As for any kind of changes or anything else, literally, I am one-and-a-half weeks in, but to me, it’s very important to be able to go into the facility and listen and get to know people because that is the best way to continue moving an organization forward. This facility has a great history of continuous process improvement, especially at the frontline level, and we have been selected as one of 18 pilot sites in the VA as a high-reliability organization, which means that we are committed to getting to zero

Growth by Design

harm. So basically, my goal is to empower our employees to be able to speak up and to engage in process improvement activities at the frontline level to be able to benefit our veteran population.

What opportunities do you see for this facility, or for veteran care in general?

I I think really where our opportunities lie are continued interaction with the community and then also with our veteran population. As many people know, the MISSION Act was passed and took effect in June of this year, which gives veterans the choice to receive private-sector health care if they meet certain drive-time standards or if we’re not able to provide access within a certain amount of time for both primary care and specialty appointments, too. So our goal really is to be reaching out to those veterans, making sure that they understand that they have earned the right to be able to come to VA Northeast Ohio Healthcare System and what great services we provide here — not only in the array of services that we provide, both primary care and specialty, not only all of the locations around here, but the top-notch quality that we provide, especially in comparison to private-sector hospitals. So as this MISSION Act continues to be implemented more and more, we’re going to realize that not only VA data, but private-sector data is going to become more transparent, too. So we want to get that information out there and work together with the local hospitals to be able to provide the best quality of care in the country.

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P016_CL_20191021.indd 16

10/17/2019 11:29:19 AM

CRAIN’S CLEVELAND BUSINESS

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O C T O B E R 21 - 2 7, 2 019

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PA G E 17

THE LIST

Accounting Firms

Ranked by number of CPAs in Northeast Ohio as of Sept. 1, 2019 FULL-TIME LOCAL 2018 STAFF REVENUE % CHANGE 9-1-2019 (1) (MILLIONS) (2)

LOCAL CPAS

LOCAL PERSONNEL ENGAGED IN

COMPANY NAME MAIN LOCAL OFFICE

9/1/ 2019

9/1/ 2018

AUDITACCOUNTING

1

Ernst & Young LLP 950 Main Ave., Cleveland 44113 216-861-5000/ey.com

350

331

5.7%

1,447

$34,800

534

150

157

606

Monte Repasky, Cleveland office managing partner; Whitt Butler, Akron office managing partner

2

PwC LLP 200 Public Square, 18th floor, Cleveland 44114 216-875-3000/pwc.com

165

159

3.8%

347

NA

144

97

52

54

Mark Ross, Cleveland office managing partner

3

Cohen & Co. 1350 Euclid Ave., Suite 800, Cleveland 44115 216-579-1040/cohencpa.com

161

155

3.9%

342

$88.3 (3)

106

94

24

110

4

Deloitte LLP and its subsidiaries 127 Public Square, Suite 3300, Cleveland 44114 216-589-1300/deloitte.com

105

105

0.0%

450

$43,200

165

88

175

22

Paul Wellener, Northeast Ohio managing principal

5

KPMG LLP 1375 E. 9th St., Suite 2600, Cleveland 44114 216-696-9100/home.kpmg/us

95

95

0.0%

185

$28,960

50

20

90

25

James Mylen, managing partner

6

BDO 1422 Euclid Ave., Suite 1500, Cleveland 44115 440-248-8787/bdo.com

88

98

-10.2%

179

$8,990

59

71

30

19

Robert M. Littman, Ohio managing partner; Dave McClain, Tax Office managing partner; Teri Schaffer, Assurance Office managing partner

7

RSM US LLP 1001 Lakeside Ave. E., Suite 200, Cleveland 44114 216-523-1900/rsmus.com

75

82

-8.5%

165

$2,436.37

55

27

46

37

David Andrews, Ohio market leader

8

CliftonLarsonAllen LLP (CLA) 4505 Stephen Circle N.W., Suite 200, Canton 44718 330-497-2000/CLAconnect.com

73

69

5.8%

90

$1,100

33

38

9

10

Dane Mayle, principal; Steven O. Pittman, managing principal, Canton and Akron offices

8

Meaden & Moore 1375 E. 9th St., Suite 1800, Cleveland 44114 216-241-3272/meadenmoore.com

73

72

1.4%

148

NA

59

40

25

24

James P. Carulas, CEO

10

Maloney + Novotny LLC 1111 Superior Ave., Suite 700, Cleveland 44114 216-363-0100/maloneynovotny.com

71

79

-10.1%

140

NA

74

38

12

16

Jon Ruple, managing shareholder

11

Skoda Minotti 6685 Beta Drive, Mayfield Village 44143 440-449-6800/skodaminotti.com

69

70

-1.4%

216

$58.56

57

36

51

72

Gregory J. Skoda, chairman

12

Bober, Markey, Fedorovich & Co. 3421 Ridgewood Road, Suite 300, Akron 44333 330-762-9785/bmfcpa.com

55

57

-3.5%

97

NA

37

34

9

17

Richard C. Fedorovich, CEO, managing partner

13

The Siegfried Group LLP 950 Main Ave., Suite 610, Cleveland 44113 216-912-1342/siegfriedgroup.com

54

47

14.9%

60

$218.09

0

0

54

0

Brian D. Seidner, managing director, Lake Erie Markets-Cleveland, Columbus, Pittsburgh, Toledo

14

Grant Thornton LLP 1375 E. 9th St., Suite 1500, Cleveland 44114 216-771-1400/grantthornton.com

50

54

-7.4%

107

$1,800

34

32

27

14

Thomas P. Freeman, office managing partner

15

Rea & Associates 6300 Rockside Road, Suite 100, Independence 44131 216-573-2330/reacpa.com

49

45

8.9%

102

$50.41

24

49

24

45

Rick T. Lash, regional president, Northeast Ohio

16

Pease & Associates LLC 1422 Euclid Ave., Suite 400, Cleveland 44115 216-348-9600/peasecpa.com

48

48

0.0%

94

$14.7

24

51

4

15

Kuno S. Bell, managing partner

17

Apple Growth Partners 1540 W. Market St., Akron 44313 330-867-7350/applegrowth.com

45

37

21.6%

102

$17.09

21

53

10

18

Charles Mullen, chairman

18

HW&Co. 23240 Chagrin Blvd., Suite 700, Beachwood 44122 216-831-1200/hwco.com

43

42

2.4%

81

$19.19

25

20

14

9

John P. Fleischer, president, CEO

19

Plante Moran PLLC 1111 Superior Ave., Suite 1250, Cleveland 44114 216-523-1010/plantemoran.com

41

29

41.4%

69

$686.9

35

20

8

6

Daniel P. Hursh, office managing partner

20

Barnes Wendling CPAs Inc. 1350 Euclid Ave., Suite 1400, Cleveland 44115 216-566-9000/barneswendling.com

38

38

0.0%

72

NA

22

28

7

15

21

CBIZ Inc. 6050 Oak Tree Blvd. S., Suite 500, Independence 44131 216-447-9000/cbiz.com

36

37

-2.7%

323

$922

26

23

140

183

Jerome P. Grisko Jr., president, CEO

21

Corrigan Krause 2055 Crocker Road, Suite 300, Westlake 44145 440-471-0800/corrigankrause.com

36

34

5.9%

59

$8.87

19

22

6

20

Thomas L. Harrison, president, CEO

23

Sikich LLP 274 White Pond Drive, Akron 44320 330-864-6661/sikich.com

33

36

-8.3%

94

NA

30

17

31

16

David A. Brockman, partner-in-charge, Akron

24

Ciuni & Panichi Inc. 25201 Chagrin Blvd., Suite 200, Beachwood 44122 216-831-7171/cp-advisors.com

32

32

0.0%

56

NA

31

14

7

4

Brian D. Marita, president

25

Four-Fifteen Group 4300 Munson St. N.W., Canton 44718 330-492-0094/415group.com

28

26

7.7%

65

$9.52

15

27

17

6

Frank J. Monaco, managing partner

26

Hobe & Lucas CPAs Inc. 4807 Rockside Road, Suite 510, Independence 44131 216-524-8900/hobe.com

27

24

12.5%

38

NA

20

11

6

1

Louis V. Loparo, managing shareholder

TAX

CONSULTING OTHER TOP LOCAL EXECUTIVE

Randall S. Myeroff, president, CEO

Jeffrey D. Neuman, president, director

RESEARCHED BY CHUCK SODER: CSODER@CRAIN.COM

Get 34 firms, more contact info and more executives in Excel. Become a Data Member: CrainsCleveland.com/data

Information is supplied by the companies unless footnoted. Send feedback to Chuck Soder: csoder@crain.com (1) Employee numbers by service line in some cases do not add up to the number in the full-time local staff column. (2) Revenue excludes income from independently owned firms that share the same brand name. (3) From Inc. 5000

P017_CL_20191021.indd 17

10/18/2019 9:28:48 AM

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O C T O B E R 21 - 2 7, 2 019 |

CRAIN’S CLEVELAND BUSINESS

LIST ANALYSIS

Accounting firms keep adding CPAs, but pace slows

By Chuck Soder

Walthall, which was acquired by Rea & Associates in November 2017, an event that caused Rea’s csoder@crain.com numbers to go way up in 2018.) @ChuckSoder However, overall hiring hasn’t For eight straight years, the num- slowed: The 34 firms had 5,325 ber of local CPAs employed by full-time local employees as of companies on our Accounting Sept. 1, up 3.4% since last year, just slightly lower than the previous Firms list has gone up.

It went up again this year, but the year’s increase.

Most firms on the increase wasn’t quite list have grown in reas big as it has been Most firms on cent years, but this in the past. year 13 firms saw inThe 34 firms on the the list have full digital list em- grown in recent creases and another 13 saw decreases; the ployed 2,044 CPAs in others reported the Northeast Ohio as of years, but this same number both Sept. 1, up 19.7% year 13 firms years. since 2012 — or 22.4% But the increases since 2011, if you ex- saw increases clude two smaller and another 13 are bigger than the decreases, and the firms that didn’t resaw decreases. top three companies spond that year. on the list are helping But over the past 12 months, the CPA total went up drive that growth.

The firm in the No. 1 spot, Ernst & by just 1.4%, or 29 CPAs. That percentage is low compared Young, posted a 5.6% increase. The with the past few years. Last year, next two companies, PwC and Cothe same 34 companies added 57 hen & Co., both reported increases local CPAs, a 2.9% increase, and the of nearly 4%.

Plante Moran reported 41 local year before that they added 62, a 3.3% increase, according to histori- CPAs, up 12 since last year, giving it cal data from the Excel version of a whopping 41.4% increase — the list. (Note: This analysis in- enough for it to jump from No. 24 cludes historical data from on last year’s list to No. 19 this year.

SBA

CONTINUED FROM PAGE 4

That slowdown naturally hits Ohio harder as manufacturing continues to play an outsized economic role here compared to other states.

“The most global Ohio manufacturers are, I think, affected by the uncertainty with trade policy and tariffs,” Adams said. “As most global companies throttle back on investment plans while awaiting clarity, that has affected demand for smaller and less global manufacturers in the state.”

That said, according to a recent Beige Book update from the Federal Reserve Bank of Cleveland: “A few manufacturers suggested that their customers let inventories run too low in anticipation of a more significant manufacturing slowdown than has materialized. As a result of the need to restock, demand for these manufacturers’ products picked up in recent months.”

Goldberg noted that for the first couple weeks of fiscal year 2020, lending is picking up compared with prior years. But it’s much too early to call that a trend.

In fact, the Fed reported that while many of its contacts expect economic expansion to continue, they’re also generally tempering their own outlooks for growth over the next six to 12 months.

Overall, the lower demand for SBA loans in this region mirrors national activity.

Reports by the Federal Reserve Bank of St. Louis show that credit demand in the small business sector has weakened consistently across the U.S. over the last 12 months.

Notwithstanding some impact of

Lending dips in FY ’19

Lending dips in FY ’19 After a few years of stable activity, the Cleveland SBA district processed 1,480

After of stable activity,less), the Cleveland SBA district processed loans ainfew the years last fiscal year (18.2% totaling $412.6 million (down 9%). 1,480 The loans in the lastbe fiscal year (18.2% totaling furlough $412.6 million (down 9%). decrease could in part due to theless), government last December, butThe decrease could be inbanks part due theproducts government furlough last December, but competition among overto loan is another likely factor. competition among banks over loan products is another likely factor.

2,000

1,480 1,909

1,500 1,000 Total loans

PA G E 18

500 0

’12

’13

’14

’15

’16

’17

’18

’19

SOURCE: U.S. Cleveland district SOURCE: U.S. Small SmallBusiness BusinessAdministration, Administration, Cleveland district

“As most global companies throttle back on investment plans while awaiting clarity (on trade policy and tariffs), that has affected demand for smaller and less global manufacturers in the state.”

— Bill Adams, senior economist covering Ohio for PNC Financial Services

the furlough, Goldberg also postulated that lower SBA activity is an indicator of increased competition among lenders themselves. That

competition is prompting some firms to eliminate personal guarantees — which apply when someone owns 20% of more of the business — that come with government-backed SBA loans, leading to less reliance on the program. That strategy is surfacing as a way to win a borrower’s business.

“Not all banks are doing it,” Goldberg said. “Some may be looking on a case-by-case basis, while others are doing that more freely.”

Banks are reporting generally strong levels of credit quality through the third quarter. However, relying less on personal guarantees could be a sign of weakening credit-risk policies among financial institutions, something that may materialize in bank balance sheets in following quarters as bad loans. If that continues, it could be a harbinger of an overheating market, which could lead to the same behaviors that spurred the Great Recession.

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P018_CL_20191021.indd 18

10/18/2019 1:44:57 PM

CRAIN’S CLEVELAND BUSINESS

FOOD TRUCKS

Taking the leap A dedicated vegan, Negrelli cooked much of her food at home because she was disappointed in most restaurant food.

“I’m making really good vegan food,” Negrelli remembered thinking when she lived in Wisconsin. “I’m going to try to sell this. A food truck is the most affordable way to break into the business.”

A cost analysis by Compare the Market Ltd. shows that startup costs for a food truck (cost of van and premises insurance) average $20,600, which is about one-third the startup costs of a brick-and-mortar restaurant (cooking equipment, seating and layout, point-of-sale system and premises insurance) at $67,318.

However, a quick survey of used food trucks for sale in Northeast Ohio turned up price tags ranging from $13,200 for a food-service trailer to $64,900 for a fully equipped truck.

Danny Molnar bought and built his first food truck in 2015, after watching the steady growth of the sector in Northeast Ohio. Molnar, who is president of the Northeast Ohio Food Truck Association, owns two SWAT (Stuffed With Amazing Taste) food trucks that sell hamburgers, wraps and barbecued and smoked meats.

“By no means is it an easy or cheap startup,” he said. “Whatever you think it will cost, double or triple it.”

The Compare the Market report also indicates that annual permit and license costs are about 4% higher for food trucks ($9,050) than for restaurants ($8,662).

“I’m constantly jumping through hoops,” Molnar said. For instance, most restaurants get health department inspections twice a year, but his food trucks are inspected weekly.

Molnar also advised entrepreneurs to double or triple the time they expect to spend running their truck.

“If you’re doing this business right, to make money, you’re working long hours,” he said. “It’s like a restaurant.

My day still starts at 8 a.m. or earlier.

And on a weekend or some weekdays, I’m not coming home until 9 or 10 o’clock at night.”

Finding a ride Molnar started by buying an old mobile command center that had been retired from a Washington, D.C., airport after 9/11.

“That’s how I came up with the name and concept,” he said. “It was basically already a SWAT unit.”

Molnar, who has a construction background, kitted out his first truck.

“It took me about six months to build it, and then I hit the road.” he said. “It’s a half-million-dollar kitchen on wheels.”

Two years ago, Molnar bought and equipped his second truck “with my

P019_CL_20191021.indd P019_CL_20191021indd.indd 19 19

S OECPTTOEBME B R E21 R 3- -2 9 7,, 2 019 018

“I knew plenty of guys who have way too much invested in the truck. But when it’s time to be done, you owe all these people.

You might not walk away with any (money) after 10 years.”

CONTINUED FROM PAGE 1

However, starting a food truck business may not be as easy as it looks.

“Breaking into the food truck world requires extremely hard work, a solid financial plan and patient, persistent pursuit,” according to Restaurant MBA, a Nashville business that offers free online video training for restaurant owners.

“Just like restaurants, food trucks have a very high rate of failure, with 60% going under within three years of opening,” Restaurant MBA said in an online article called “Why Food Trucks Fail — Part 1.”

Food trucks fail for many reasons, but the main factor likely is oversimplification, according to the story.

|

— Matt Barnes, Manna Food Truck owner

Manna Food Truck owner Matt Barnes prepares a walleye sandwich for deep frying. (David Kordalski)

Food truck vs. restaurant Here’s a look at the costs associated with a food truck startup compared with those of a restaurant, based on national averages:

UPFRONT COSTS Food truck Cost of van: $17,600 Premises insurance: $3,000 Total: $20,600

Restaurant Cooking equipment: $50,000 Seating and layout (80 people): $14,080 Point-of-sale system (hardware): $921 Premises insurance: $2,317 Total: $67,318

LICENSES Food truck Business registration: $113 Vehicle registration: $88 Health permit: $625 Fire permit: $125 Food truck application: $300 Business license: $88 Food service license: $550 Liquor license: $7,150 Food handler’s permit: $12 Total: $9,050

Restaurant Business registration: $113 Health permit: $625 Fire permit: $125 Business license: $88 Food service license: $550 Liquor license: $7,150 Food handler’s permit: $12 Total: $8,662

RECURRING COSTS Food truck Annual Public liability license: $673

Public liability insurance: $673 Monthly

Mobile point-of-sale system software: $131 Fuel: $500 Serveware: $350 Parking: $625 Commissary kitchen: $850

Renting premises: $1,597 Mobile point-of-sale system software: $230 Utilities: $1,000

Initial stock: $2,602 Total recurring costs per month: $12,992

savings and every ‘man toy’ I ever had,” he said, explaining the sale of his motorcycle, camper and golf cart.

Matt Barnes got into the food truck business while taking a hiatus from a demanding career as a chef and restaurant owner.

“I used to own a restaurant in Westlake and Rocky River called Saucy Bistro, which was a fine-dining restaurant,” he said. “I’d been doing that 10-plus years. I sold that just to take a break.”

After selling his restaurant, Barnes started catering events for some of his previous customers.

“A friend who is a pastor at a local church had been given a food truck.

He didn’t know what to do with it, but I did,” he said.

Barnes partnered with Bethel Cleveland church to run Manna Food Truck, making some money for the church. He also partnered with

Marketing on the go Most local food trucks use social media as well as listings on StreetFoodFinder, an app and website that helps customers in several Ohio cities find food trucks.

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“My truck is completely vegan,” said Negrelli, who prepares all her food on the truck. “I try to do ‘normal’ things that people like to eat without the use of animal products.”

Negrelli said she turned a profit the first year.

“I got lucky on the build of the truck and got help from family and friends who worked for little or no money,” she explained.

Molnar got food ideas “from finedining restaurants and made them food truck-accessible. I didn’t want to lock myself into one type of truck,” he said.

He uses the diner in the Adesa vehicle auction house in Northfield to prep food.

“Now, we’re doing more private parties than public events because we are so popular,” Molnar said.

Barnes uses his Gourmet Guy Café in Rocky River, which he opened about a year ago, to prep food for his truck each morning. Before opening the café, he rented space in church kitchens for food prep.

His two Manna Food Trucks sell dishes designed to appeal to families, with a menu that ranges from burgers to a lobster roll.

While some chefs, like Barnes, own both food trucks and restaurants, Negrelli said she’s “totally happy having the truck and doing the mobile thing.”

“I love the freedom of it,” she said.

“I love having the option to work the events I like to work. It’s always something new and different. We go to music festivals and art shows. We get to see a ton of different things and expose our food to a variety of different people.”

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A decade ago, few banks wanted to lend money to open restaurants, let alone food trucks.

“That’s changed significantly,” said Gil Goldberg, district director for the U.S. Small Business Administration district office in Cleveland. “We do a lot of loan guarantees for restaurants now.”

The Cleveland SBA district guaranteed bank loans for 16 food truck businesses in the fiscal year ended Sept.

30, a spokeswoman said in an email.

Negrelli bought a shell of a truck that had to be filled with equipment.

“I didn’t know anything,” she admitted. “My brother had been a restaurant guy and his father-in-law is an RV guy. Between the two of them, we figured it out.”

|

Weekly Initial stock: $2,602 Total recurring costs per month: $13,292

contact Suzanne Janik at 313-446-0455 or email sjanik@crain.com BUSINESS FOR SALE

BUSINESS FOR SALE

Commercial Insulation Company for Sale

For Sale: Repair & Service Business - Successful Tow Motor far west side greater Cleveland area for sale. 110 clients that use this business. National Business Brokers Inc 440-774-4400

Very Profitable Sales $ 837,985 mike@empirebusinesses.com www.empirebusinesses.com 440-461-2202

Source: Compare the Market Ltd.

Lutheran Metropolitan Ministry to train and employ formerly incarcerated men and women at the food truck.

After two years, Barnes sold the truck he had used for catering so he could buy the church’s food truck. He and his wife, Julie, soon bought and equipped a second truck “out of cash that we had made from being on the first truck,” he said.

Some owners borrow a lot of money to buy and equip new food trucks.

“I knew plenty of guys who have way too much invested in the truck,” Barnes said, adding that he learned the debt lesson the hard way. He had taken on investors to open Saucy Bistro.

“But when it’s time to be done, you owe all these people,” he said. “You might not walk away with any (money) after 10 years.”

Now, Barnes and his wife adhere to a no-debt policy.

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CRAIN’S CLEVELAND BUSINESS

AKRON

RVshare posts a vacation-filled summer

By Dan Shingler dshingler@crain.com @DanShingler

Akron’s RVshare, the company that uses its online platform to link owners of recreational vehicles with those who want to rent them, had an outstanding summer, CEO and coowner Jon Gray said.

“In terms of scale, we’re not a startup anymore by any means,” Gray said. “We have more than 150,000 RVs on the platform now, and we just announced that we’ve had a million days of rental on the platform. … We hit that this summer.”

According to Gray, the company is taking off on a growth pattern he’s seen before as CEO of HomeAway, another sharing-economy company, which allows people to rent their homes out to others through its platform. Gray spent 12 years running that company in Austin, Texas, before joining RVshare as CEO at the start of 2018.

But only after he and his investors sold HomeAway for nearly $4 billion in 2015, he added.

As was with the case with HomeAway, Gray said, the chief challenge is raising awareness of his industry and increasing the willingness of RV owners to participate by putting their vehicles or tow-behind trailers on the platform to rent.

RVshare CEO Jon Gray

“I really liked the idea of taking an underserved area of travel and taking it to the mainstream. That’s what we did with HomeAway,” said Gray, explaining why he was lured back to full-time work after a three-year hiatus. “It has a lot of the same capability to change the way people think about travel. The U.S. is becoming more urban, so people want to travel outside and get back to nature. RVs are the perfect way of doing that.”

The company is also growing in terms of personnel. Its ranks swell during its peak season between Memorial Day and Labor Day. Employment temporarily spiked above 100 workers for the first time this past summer.

Now, it’s back down to an offseason level of a little more than 60 fulltime, permanent employees, but that’s about 20 more than it had a year ago at this time, Gray noted.

RVshare hires both seasonal interns and permanent employees largely from Akron-area universities such as the University of Akron and Kent State University, Gray said, because it finds great employees in the region.

That’s also one reason Gray said he he’s not about to move the company to Austin, where he lives and where RVshare has about 15 employees.

“We don’t have any plans to do that,” he said. “The core of this business has been in Akron, and here it’s not like hiring in Silicon Valley, where you hire someone and in six months they want to go somewhere else. We have a very strong and loyal employee base here, and we certainly have no plans to move.”

The company has achieved an important critical mass, enabling it to offer RVs to potential renters in almost any part of the country, Gray said. In all, it has more than 5,000 U.S. locations to pick up an RV, most of them at the homes of the vehicles’ owners.

“You could search Hudson, Ohio, right now and you’d probably find one,” Gray said during a recent interview at Heartwood Coffee Roastery in Hudson.

To get to this point, the company

has drawn down about $20 million of a $50 million private equity investment it received in 2018 from Austin’s Tritium Partners. It’s used that money to redesign its website and embark on a marketing blitz that garnered headlines in The New York Times, USA Today, Parade Magazine and a slew of local publications.

It’s all helped to attract more RV owners, as well as renters, Gray said.

In fact, RVshare now has owners on the platform who purchased their RVs not to use them, but solely to rent them — a phenomenon Gray said he also saw with HomeAway participants.

The math adds up for the most savvy owners, he said. They pay between $40,000 and $300,000 for an RV, either new or used, and rent it for an average of $200 a day, with RVshare taking a 25% commission.

“Our top owners have more than one RV, and they’re making hundreds of thousands of dollars a year.

But they’re the ones who are treating this like a business and buying newer ones. … It’s not hundreds doing this, but it’s dozens. And my HomeAway experience tells me it will be hundreds in a few years,” Gray said.

Bob Weisberg of Chesterland said the platform provides him with a second source of income in his semi-retirement.

“I actually at this point rent four RVs,” Weisberg said.

He was renting RVs on his own be-

fore RVshare came along, he added.

Now, though, he said it’s worth paying the commission to let RVshare do most of his marketing and send him renters to increase his revenue. He still rents on his own as well.

“I rent them out and I take one to Florida in the winter every year,” Weisberg said, noting that he needs his RV at the same time that renters are scarce, so it works out well.

It’s work, however, because the vehicles have to be cleaned and sometimes patched up after a rental. They have to be maintained just like any other on-the-road vehicle.

During the summer, his vehicles are usually on the road elsewhere.

“At this point, I would say they’re rented out 60% of the time” during the high season, Weisberg said.

The process can be a bit daunting, as Weisberg said about 70% of his renters have never driven an RV before he takes them for a test drive.

But that’s what the insurance is for, he noted, and he’s learned to not worry much about it.

“Multiple times, they’ve kissed a flower pot or the stanchion at the end of the gas pumps, but nothing too bad,” he said.

Most important, the process is profitable for him, Weisberg said. He buys recent but used RVs to keep his costs down, then is able to pay them off in about two and a half years from his rental income.

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P020_CL_20191021.indd 20

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CRAIN’S CLEVELAND BUSINESS

CONTINUED FROM PAGE 1

Dominic Ozanne, president and CEO of Cleveland-based Ozanne Construction Co., said, “For the last 10 years, we’ve had historic levels of construction locally, regionally and nationally. That creates the skepticism from listening to economists talking about a downturn. Low interest rates drive a lot of construction. I hope it continues and we see a lot of prospects. We’re finishing up a lot of work, but you have to look for what’s next to keep the train running.”

Skoda Minotti’s report shows that respondents feel opportunities are on the wane locally and only slightly better out of town. This year, 45% of respondents said they expected more opportunities in Northeast Ohio, down from 52% last year. However, their predictions for growth outside Northeast Ohio dipped to 51% in 2019 from 56% in 2018.

Another sign of the building market’s strength is that 69% of respondents are primarily seeing four or fewer competing bidders this year, compared to 61% in 2018. And 25% of the respondents this year are seeing five to nine bidders, compared to 36% last year.

The contracts that builders are landing are also fatter than in the past. Half the respondents in 2019 said the average job they are working on is larger than previously, and 44% said it has stayed the same. Last year, 41% of respondents said the average job was larger than in the past, and 55% said it had stayed the same. The number of respondents seeing smaller average job sizes remained in single digits, but climbed to 6% this year from 4% last year.

Another reflection of the growth of the building market is that lack of work is cited as a threat by just 12% of the respondents this year, up from 9% last year. However, that’s a big drop from 2010, when 69% of the respondents said lack of work was the biggest threat to their business.

Instead, the biggest threat to their business today is securing skilled labor, cited by 55% this year, up from 53% last year. “This concern grows every year,” Gingerich said. In Skoda Minotti’s 2013 survey, 6% of the respondents saw it as a business threat.

Tony Panzica, president and CEO of Panzica Construction Co. of Mayfield Village, said labor shortages did not seem as difficult this year as they were in 2018, when multiple big jobs were finishing up. However, it’s still an important, long-term issue.

Tim Lavelle, president of the Gorman-Lavelle Corp., a Cleveland mechanical contractor for plumbing, heating and air conditioning, said, “The skills gap in construction is real.

The unions are all gray. It’s going to be a painful thing to change.”

While union halls provide workers for big construction jobs, Lavelle said the biggest challenge is finding staff workers to cover service calls for institutional and commercial clients because they are often on call after 5 p.m., which cuts into family time. He said he has two openings and estimates it takes six years to get a hire who’s new to the trade up to speed.

Ozanne said that 20 years ago it wasn’t difficult to find people willing to work overtime, but it’s difficult today.

“It’s good they want to spend more time with the family, but it changes the equation in the industry when they don’t want overtime,” he said.

In Skoda Minotti’s survey, securing skilled labor solutions was cited as the highest priority by 62% of the respondents this year, up from 57% last year.

For the first time, Skoda Minotti asked what companies are doing to combat the labor shortage. A majori-

P021_CL_20191021.indd 21

ty, 57%, said they are increasing salaries. Another 46% said they have started employee appreciation programs, and 46% said they are partnering with trade and high schools.

Skoda Minotti’s survey of real estate owners and managers also reflected comparatively good times, as respondents noted increases in spending for payroll, professional services and higher rents among apartment and commercial properties.

Costs remain the top-ranked barrier to construction in Northeast Ohio in the survey, as it was last year.

However, the run-up of apartment, industrial and retail projects has raised availability of inventory to the second-highest barrier for development this year from the sixth-ranked item in 2018.

Halapy said he is surprised that customers so far have been willing to absorb increased construction costs.

“So far, we’re hearing that customers want to go ahead despite increased costs,” he said, “which throws gas on the flames. You have to wonder how long it goes on before it starts reducing the market.”

HQ

CONTINUED FROM PAGE 3

He also likes the site for a reason well known to Sherwin-Williams employees, as some of the closest parking to the headquarters is on the riverside.

“The river is mystical,” Sarstedt said.

“Everyone wants to live or work by the river, especially one like we have with ore boats and scullers using it.”

Yet another major option is a lakefront site. Substantial building sites remain available at The Wolstein Group’s Flats East Bank Neighborhood, as well as underutilized sites such as The Pit, a James Kassouf-owned parking lot between West Ninth and West Third Street overlooking the ClevelandCuyahoga County Port Authority.

One big option is the site that the joint venture of Cumberland Development LLC of Cleveland and Trammell Crow Co. of Dallas control for lakefront development under a lease from the city of Cleveland at North Coast Harbor. Part of the site north of FirstEnergy Stadium could accommodate a million square feet of office space, accord-

ing to the joint venture’s plan.

Another factor that will shape what or how much of a statement Sherwin-Williams could make on the skyline is the persnickety ground on which downtown Cleveland sits. Developers often call it “bad soil” because it’s sandy and bedrock is 100 to 200 feet below ground, depending on what part of downtown you are considering.

A 30-year veteran of studying downtown Cleveland soils for multiple skyscraper projects, Duane Schreiber, president of geotechnical engineering consulting firm David V. Lewin Corp. of Cleveland, said the 59-story Key Tower required caissons 220 feet deep to reach bedrock for a foundation. The 32-story Hilton Cleveland Downtown went down 120 feet.

Low-rise buildings may use a concrete mat as the foundation, but taller buildings require the more expensive caissons.

“You could do 25 to 30 stories near Public Square with a concrete mat foundation,” Schreiber said. “If you want to do more than that there, you have to go to caissons, which causes a

O C T O B E R 21 - 2 7, 2 019

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PA G E 21

big jump in cost. You may as well go a lot higher (such as 60 stories) to make it worthwhile.”

Building near the river means the bedrock is closer to the surface, he added, while the lakefront has its own constraints to accommodate the low water table.

Other factors shaping how high a building may soar include how much the developer will pay for the site — a bigger building could justify a steep land price — and the client’s time constraints.

Dick Pace, CEO of Cumberland, said he doesn’t know if the site he leases from the city of Cleveland is under consideration — and would love to have them — but puts keeping the corporation in the region and downtown in a context beyond his own project.

“The importance of Sherwin-Williams staying downtown can’t be overstated, not only for the jobs but for what it means to the residential and commercial aspects of downtown,” Pace said. “It would be very difficult for downtown to rebound from the loss of Sherwin-Williams.”

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ACCOUNTING

INSURANCE AND FINANCIAL

LAW

LAW

Bober Markey Fedorovich

Alex N. Sill Company

Frantz Ward LLP

Ulmer & Berne LLP

Matthew R. Mallinak, CPA, has been promoted to Partner.

He brings various financial disciplines related to serving high-growth, middlemarket public and private companies and is a recognized expert in technical areas, such as U.S. GAAP reporting, SEC reporting & advisory, SOX implementation and compliance, and IPOs. Matt excels at developing innovative and practical business solutions to complex business problems that increase efficiency, improve existing processes and ultimately reduce cost.

Tom Kaufman, MBA has been named Director of Marketing & Digital Media at Alex N. Sill Company.

Tom comes to Sill from his own agency, Owll Marketing in Mentor. Prior to that, he was Senior Director of Marketing at Maritz Global Events and Director of Marketing at Experient. Tom brings extensive experience to Sill in leading and developing integrated digital marketing strategies as well as a deep understanding of the marketing and branding landscape impacting businesses today.

Douglas Schnee joins Frantz Ward as Partner in Labor and Employment. Doug represents employers on issues such as wrongful termination, retaliation and discrimination matters arising under the Ohio Civil Rights Act, the Americans with Disabilities Act (ADA), Title VII, the Age Discrimination in Employment Act, the Fair Labor Standards Act, and the Family and Medical Leave Act. Doug earned his J.D., cum laude, from Case Western Reserve University School of Law and his B.A. from Tulane University.

Ulmer is pleased to announce that Mary Forbes Lovett, Partner and Chair of Ulmer’s Real Estate Practice Group, has been elected to the firm’s Management Committee, which is responsible for guiding the operations and strategic direction of the firm. Lovett specializes in the development and financing of urban properties, and has significant experience handling development, acquisition, and alternative financing. She received her law degree with honors from the ClevelandMarshall College of Law.

INSURANCE AND FINANCIAL

LAW

Alex N. Sill Company

Walter | Haverfield LLP

Liz Cross, CPA has been named Chief Financial Officer of Alex N. Sill Company.

Liz comes to Sill from WBC Group, LLC where she was the Vice President of Finance. Prior to that, she was a Manager at PricewaterhouseCoopers servicing many different industries. Liz has served on several community boards and is actively serving as a board member of The Gathering Place.

She is responsible for the company’s finance, treasury management, financial planning, information technologies and risk management.

Walter | Haverfield LLP is pleased to announce that Joseph Brennan has joined the firm as a partner in its Labor and Employment group.

Brennan’s practice focuses on representing employers in a wide variety of labor and employment legal matters, including wage and hour, employment discrimination, occupational safety and health, traditional labor and ERISA litigation matters. For more information, visit www.walterhav. com.

BANKING

TriState Capital Bank TriState Capital Holdings, Inc. (Nasdaq: TSC) announced that Nick Goodman now serves as vice president, associate relationship manager of commercial real estate for TriState Capital Bank’s Ohio regional office. Goodman will provide support in managing existing loans and relationships, while actively participating in the drive to accelerate new loan growth, liquidity opportunities and new relationships.

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CRAIN’S CLEVELAND BUSINESS

SOURCE LUNCH

Jim Mullen President and CEO, United Way of Summit County It’s hard to catch United Way of Summit County CEO Jim Mullen — alone, at least. Seems like every day he’s either opening a new career center at an Akron public school, launching a neighborhood personal finance education center or introducing someone at a podium.

We caught up with the former Clevelander and Nashvillian at his favorite breakfast place, where a lot of Akron’s movers and shakers get their eggs and pancakes: the Akron Family Restaurant. We had breakfast on Oct. 16 – and it had to be breakfast because he was hosting an event with the governor in the afternoon. Like we said, he’s busy.

As usual, Mullen came armed with tons of information about what United Way and its local partners have been up to – far more than we could fit on this page. Here’s a somewhat abbreviated version of our talk with him. — Dan Shingler

The Mullen file Favorite books “Good to Great” and “Dreamland,” by Jim Collins

Favorite local restaurant Missing Mountain in Cuyahoga Falls

Favorite city to visit Charleston, S.C.

Person he’d most like to meet Jason Bateman

A new skill or ability he’d most like to learn To ski

Lunch spot Akron Family Restaurant 250 W. Market St., Akron 330-376-0600

The meal One had “the usual”: a No. 5 basic omelet. The other had eggs, bacon and potatoes. One had coffee.

The vibe Mullen is a regular who can tell you who sits at which table on a given morning. The place is as predictable as its good eggs and bacon: nothing fancy, just an always-full cup of coffee and someone to talk over it with.

The bill $18.12, plus tip

We’ve been following you since you came back to Ohio from Nashville. What’s it been, three or four years?

Almost five. I came in 2015, so it will be five next spring. It’s gone fast!

How long were you with United Way in Nashville?

About four years.

Do you miss Nashville?

Honestly? No. Really? You know they may read this, right?

Yes. And I do miss the people. But I don’t miss the city. I think Nashville is starting to outgrow its ability to be livable. Then you can come to a place like Akron, Ohio, and have all the amenities and half the commute time. I’ll take that all day long.

Where are you living in Akron?

We’re in West Akron. We actually just built a house. … We found the lot and wanted to be in Akron, build a home in Akron and support the initiatives of the mayor with regards to population and new housing.

So you got the city’s tax abatement for residential construction?

We did, under the mayor’s program, which is great.

What makes Akron and Nashville different?

Accessibility. I mean with people. …

The willingness of people here to help you make those first few connections is uncommon.

And in Akron, it seems like a lot of people know one another. Do you find that?

If the rest of the world has six degrees of separation, then Akron has three degrees. That definitely makes us different. Just the ability to access someone quickly and not wait two or three months for someone’s calendar to open up is a big deal.

Your budget is about $15 million a year — bigger than when you got here?

Yes. We have probably twice as much money to give out and spend, both in competitive grants and direct service work.

What’s been the biggest change in your funding, aside from more of it?

When I first got here, 70% (of contributions) were designated to specific organizations. … Now, we’re at 12%. So, in four years we’ve had a big swing. That’s an additional $3 million we have to budget. It’s more work, but it’s the right work.

You’ve been focused on four Bold Goals: improving third-grade reading and high school education, improving financial literacy and reducing heroin overdoses. Which ones are showing progress?

Quite honestly, on all of them. In all four areas we’ve seen significant progress. … For instance, when we started Bold Goal one, our (2017) baseline in the Akron Public Schools for third-graders reading at grade level was 38%. Our goal was to get that to 65% by 2025 and in the 2018-19 school year data, 50% of

them are now reading at grade level.

So that’s a 12-point increase in three years. … There’s still a lot to do, though.

That should help with future graduation rates?

It should, and that’s Bold Goal two.

We baselined at 74% of kids graduating from APS, and that’s now at 80%. … But I think the real story is in industry certifications. In the ’17-18 school year, APS students received 86 certifications, which means they got a certificate confirming they have a specific skill. … In ’18-19, there were 1,440 industry certifications.

Is it time for a fifth Bold Goal?

No, no, no. We’re committed as an organization to ensuring that all four of these areas continue to progress through 2025. I think a lot of people forget we still fund basic needs significantly, but it’s not a Bold Goal. … So if we have another Bold Goal, it’s meeting basic needs.

But you seem happy to have some results, yes?

Absolutely. I joked with you when we first talked about establishing some goals: Instantly, it was “When will we measure the results?” I kept saying, “It’s five, six or seven years out.” So, to have results like this is really exciting. … But I think people get burned when they think they’ve won when they still have half a marathon ahead of them.

Are you having a good time?

I am. I believe to my core I have the best job in the city. I believe that and I love what I do every single day because of it.

700 W. St. Clair Ave., Suite 310 Cleveland, OH 44113-1230 Phone: (216) 522-1383 www.crainscleveland.com Twitter: @CrainsCleveland Publisher/editor Elizabeth McIntyre Group publisher Mary Kramer Managing editor Scott Suttell Sections editor Michael von Glahn Creative director David Kordalski Web editor Damon Sims Associate editor/Akron Sue Walton Assistant editor Kevin Kleps Senior reporter Stan Bullard, Real estate/construction Reporters Jay Miller, Government Rachel McCafferty, Manufacturing/ energy/education Jeremy Nobile, Finance Kim Palmer, Government Dan Shingler, Energy/steel/auto/Akron Lydia Coutré, Health care/nonprofits Senior data editor Chuck Soder Cartoonist Rich Williams Local sales manager Megan Lemke Events manager Erin Bechler Integrated marketing manager Michelle Sustar Managing editor custom/special projects Amy Ann Stoessel Associate publisher/Director of advertising sales Lisa Rudy Senior account executives John Petty, Scott Carlson Account executives Laura Kulber Mintz, Loren Breen People on the Move manager Debora Stein Pre-press and digital production Craig L. Mackey Office coordinator Karen Friedman Media services manager Nicole Spell Billing YahNica Crawford Credit Thomas Hanovich Crain’s Cleveland Business is published by Crain Communications Inc.

Chairman Keith E. Crain Vice chairman Mary Kay Crain President KC Crain Senior executive VP Chris Crain Secretary Lexie Crain Armstrong CFO Robert Recchia G.D. Crain Jr., Founder (1885-1973) Mrs. G.D. Crain Jr., Chairman (1911-1996) Reprints: Laura Picariello, 732-723-0569 or lpicariello@crain.com Customer service and subscriptions: 877-824-9373 Volume 40, Number 42 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for the last week of December, at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230.

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THE WEEK Shore thing

Powering down

Cuyahoga County Executive Armond Budish announced plans to install a public lakefront walkway on 30 contiguous miles of Lake Erie.

The goal of the Cuyahoga County Lakefront Public Access Plan is to connect paths, trails and boardwalks bordering the lake with public access points along the shoreline from Bay Village to Euclid.

An advisory group including representatives of NOACA, Cleveland Metroparks, the Cleveland-Cuyahoga County Port Authority, the Northeast Ohio Regional Sewer District and lakefront municipalities has received a grant to survey the shoreline. The city of Cleveland Public Works department and NOACA will facilitate public engagement, including talks with shoreline property owners.

Power management giant Eaton Corp. agreed to sell its lighting business to Signify N.V. for $1.4 billion. The decision to sell the lighting business represents a focus on core markets for Eaton, and it gives Signify a significant growth opportunity in North America.

Eaton said the sale is expected to close in the first quarter of 2020.

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Solution is near

The recently unveiled Cuyahoga County Lakefront Public Access Plan hopes to connect existing paths, parks, trails and boardwalks from the county’s eastern border to the west. (cuyahogacounty.us)

Akron’s FirstEnergy Solutions expects to conclude its restructuring by the end of this year after U.S. Bankruptcy Court Judge Alan Koschik confirmed the company’s reorganization plan. The company for now is a subsidiary of FirstEnergy Corp.

FirstEnergy Solutions said Koschik confirmed a plan “that was support-

ed by more than 93% of voting creditors.” The company said it will “begin to implement the plan, subject to satisfaction of other conditions to the effectiveness of the plan, including all regulatory approvals.” FirstEnergy Solutions has been in bankruptcy since March 2018.

Holiday spirit The Holiday Inn Cleveland Mayfield, 780 Beta Drive, was acquired by an affiliate of Spark Hotels of Solon, which plans to undertake a substantial interior and exterior updating of the 108-room hotel with an attached conference center. The Mayfield Village property was sold by Village Development Ltd., its owner for the last 23 years, to Spark’s GLHG Mayfield Holding. County records indicate it was more than a $5.6 million deal.

10/18/2019 1:49:25 PM

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