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Powerful allies are in cards Wichita’s formidable billionaire Koch brothers have equity muscle to spare in aiding American Greetings’ go-private deal By MICHELLE PARK mpark@crain.com
Nestled in paragraph four of last week’s announcement about the
Weiss family finally striking a deal to take private American Greetings Corp. was another revelation: The impossibly wealthy, very Libertarian Koch family is investing alongside
them to get the deal done. And, according to those familiar with the Wichita, Kan.-based Koch Industries Inc. conglomerate, that investment means the “very cau-
INSIDE: A sampling of Charles G. Koch’s beliefs. Page 21 tious” Koch brothers see value in the greeting card maker — and could be buying an inside look at the company before they pull the trigger on an even bigger deal. See POWERFUL Page 21
INSIDE Born and bread Paul Storsin, the quality assurance manager for Orlando Baking, oversees an operation that produces about 226,000 pounds of bread and rolls per day. He says he’s always on call, and is “everywhere.” CREAM OF THE CROP, PAGE 3
Mentor’s guardian against Web theft CardinalCommerce is keeping crooks at bay with online software By CHUCK SODER csoder@crain.com
hen Pete Miller started producing his own line of hardwood floors in 1982, he wanted to serve local builders and flooring contractors near his home in the largely Amish community of Middlefield, Ohio.
CardinalCommerce is putting on some muscle as it prepares for a fight with a growing number of online crooks. With a fresh infusion of cash, the company, which makes software used to secure online purchases, plans to hire 30 to 40 people and expand its headquarters in Mentor. The 13-year-old company — which employs about 100 today, up from 55 in March 2008 — has been growing for years, but it needs to bulk up faster to make the most of two big opportunities, said Michael Keresman, Cardi- Keresman nalCommerce CEO and founder. Those are: ■ The spread of smart phones and tablet computers is driving up the number of products purchased over the Internet.
See TRADITION Page 20
See CARDINAL Page 5
JANET CENTURY
Amish employees account for about 70% of the staff at Sheoga Hardwood Flooring & Paneling in Middlefield.
TRADITION, WITH A TWIST 14
Hardwood flooring company in Middlefield has deep Amish roots, but is aided by modern technology
By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com
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SMALL BUSINESS When it comes to selling their work, artists often need help from professionals ■ Pages 13-17 PLUS: FUNNY TIMES’ GROWTH ■ ADVISER ■ TAX TIPS ■ & MORE
Entire contents © 2013 by Crain Communications Inc. Vol. 34, No. 14
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COMING NEXT WEEK
GROWTH INDUSTRY
These CIOs can be office MVPs
The number of patients served by hospice in the United States more than doubled in the 2000s, according to data from the National Hospice and Palliative Care Organization that is cited in a new report by the Cleveland-based Center for Health Affairs. There were nearly 1.6 million patients in hospice in 2010 compared with about 700,000 at the start of the decade. And the growth since 1982, the first year covered in the organization’s data, is even more dramatic. Here are the numbers:
Northeast Ohio is home to some world-class organizations, many of which are led in part by accomplished IT executives. This section will highlight some of the region’s top CIOs.
Year
Patients served by hospice
CLARIFICATION ■ University Hospitals will be a spaceholder in the Global Center for Health Innovation, collaborating with Philips Healthcare. UH inadvertently
was omitted in a list of announced tenants in the April 1 special report on the Health Innovation Center and Cleveland’s new convention center.
REGULAR FEATURES Classified ....................21 Editorial ......................10 Going Places .................9
Milestone ....................22 Reporters’ Notebook....22 Tax Liens.....................12
2010 1.58 million 2008 1.45 million 2006 1.3 million 2004 1.06 million 2002 885,000 2000 700,000 1992 246,000 1982 25,000 SOURCE: “Healthcare at the End of Life: A Look at Current Trends,” by the Center for Health Affairs
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INSIGHT
Eaton campus is a visual of its own Company’s $170 million ‘showplace’ in Beachwood is massive display of its products By STAN BULLARD sbullard@crain.com
When Eaton Corp. boss Alexander “Sandy” Cutler called the company’s new $170 million office campus in Beachwood a “showplace” last week during dedication
ceremonies, he wasn’t referring to the design of its shimmering centerpiece, the massive Eaton Center. Rather, the chairman and CEO was talking about how the building that now is home to 700 Eaton employees would serve as a place to show off to current and potential
customers all the technology in the structure made by its own factories. Eaton has put a lot of Eaton — 18 different products in all — in the 600,000-square-foot complex. And though the company wouldn’t say what percentage of the content it
sourced from its plants, it wasn’t bashful about describing the impact its equipment will have on the energy efficiency of the 10-story building with its two, five-story wings. Mr. Cutler said Eaton’s power management technology is crucial
IT’S HIS JOB TO BE ON A ROLL
— Karisse Hendrick, U.S. program manager for the Merchant Risk Council. Page One
“People think (Gov. John Kasich) is not doing a good job, but actually to me he is. Things need to change, and he has the backing to change them.” — From a response in The Big Issue. Page 10
A
“Some artists bristle at the idea of being considered an entrepreneur … they don’t want to feel they are sacrificing their work to the masses.” — Megan Van Voorhis, chief operating officer of the Community Partnership for Arts and Culture. Page 13
MARC GOLUB
Paul Storsin has been the quality assurance manager at Orlando Baking Co. since December. The company produces about 226,000 pounds of breads and rolls per day.
ON THE WEB: For a video interview with Paul Storsin, log on to:
See ROLL Page 19
www.crainscleveland.com/Storsin
Clarion gets a makeover, and a companion Beachwood hotel will be renovated and split to include upscale Indigo boutique Hotel-rich Beachwood is about to gain another one with a new level of panache as the first Hotel Indi-
See EATON Page 8
“No one wants to scare anyone away at the shopping cart level.”
By KATHY AMES CARR clbfreelancer@crain.com
By STAN BULLARD sbullard@crain.com
to slashing the building’s electric consumption to 40% of what a typical building of similar size would require. It also demonstrates the company’s commitment to sustainability.
THE WEEK IN QUOTES
Orlando Baking’s quality assurance manager says he’s on the go at all times hefty mixing system, a triple-deck oven and industrious conveyor belts are among the impressive equipment that escorts the bread from its initial dough form to the plastic bag or box. The hulking machinery enables Orlando Baking Co. to produce each day A periodic series of about 226,000 pounds of profiles of behind-the-scenes breads and people who are key to the rolls, though success of food-related no production businesses in Northeast Ohio. technology can substitute for the know-how of the company’s quality assurance manager. That title at the Cleveland-based volume baker belongs to Paul Storsin, who’s in charge of inspecting the rolls and bread at 19 production and packaging checkpoints and confirming their quality before they’re distributed.
INSIDE: A look at various statistics associated with the Eaton Center in Beachwood. Page 8
go in Ohio takes shape in the fourstory wing of the current Clarion Hotel at 26300 Chagrin Blvd. However, the Clarion is not going away. Its owner is splitting the current
hotel in two in what the lodging industry calls a “two pack.” After renovations, the Clarion will remain in place behind a new entrance facing Chagrin on the two-story eastern end of the hotel as Atlantic Hospitality Group refashions as a Hotel Indigo the west end of the property, which dates from 1968. Hotel Indigo is the fast-growing upscale boutique hotel concept of
IHG Hotel Group, the company behind the Holiday Inn and Intercontinental hotel brands. The Clarion is an affordable hotel franchise of Choice Hotels. Ted Alec Sahley, son of Atlantic Hospitality founder Ted Andrew Sahley, said the split will allow the Cleveland-based company to serve two different price levels at the See CLARION Page 19
“What is not going to go away is humor and the need for humor in the United States. Funny Times is a very viable product.” — Funny Times owner Ray Lesser. Page 13 (a cover of the August 2012 issue is above)
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Colleges want tech programs computing with more students
THE COLLECTION AUTO GROUP CONTINUES TO EXPAND
By TIMOTHY MAGAW tmagaw@crain.com
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Piquing a teenager’s or 20-something’s interest in the latest gizmo isn’t a hard sell, though getting them engrossed in the technology that drives those widgets — and, more specifically, a career in it — is a whole other story. Local colleges say interest in their computer science programs isn’t quite up to snuff in order to keep pace with the rate at which local employers are scooping up their graduates. The pending onslaught of baby boomer retirements is complicating matters further, as Northeast Ohio’s tech companies brace for an exodus of qualified workers on top of the already difficult task of staffing their growing enterprises. Reports from the Northeast Ohio Software Association, or NEOSA, suggest local tech companies are on the prowl for workers. In a report issued late last year, NEOSA said 59% of the information technology companies responding to its survey expected to boost their staffing levels over the next 12 months, and more than half noted they had difficulty hiring top talent. In January, a report from the Ohio Department of Job and Family Services found that 12% of all online job postings in the state were for computer and mathematical occupations. Those postings include openings for web developers, software engineers, IT project managers and computer systems analysts. The need for IT help exists even though there isn’t a household-name technology giant based in the state. “It’s not Microsoft. It’s not Google. It’s not Facebook, but it’s a
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lot of really cool stuff,� said Bill Blausey, chief information officer of Eaton Corp. and chairman of the Regional Information Technology Engagement Board, or RITE Board, a group charged with filling the tepid pipeline for IT workers. The problem first reared its head when the dot-com bubble burst in the early 2000s, insiders say, as hordes of tech companies that feverishly attracted millions of dollars in venture financing went bust. Since the implosion, enrollments in college programs related to computer science haven’t quite generated the same allure as in the late 1990s, though the numbers have started to rebound, albeit slightly. “There was at least a public perception it was not a field to go into, and I think that’s what kind of led to a shrinking pipeline,� said Jodi Tims, chair of Baldwin Wallace University’s mathematics and computer science department. “When you couple that with the problem on the other end with retirements, people really decided we needed to start paying attention to this.�
Misunderstood field Both locally and nationwide, tech and university leaders are working to drum up interest in the tech field. With the backing of high-profile tech gurus such as Microsoft’s Bill Gates and Facebook’s Mark Zuckerberg, a Seattle-based entrepreneur this year launched Code.org, a nonprofit geared to pushing computer science-related courses in elementary, middle and high schools. On the local front, as part of a weeklong series of events produced by NEOSA to promote the regional IT sector, the RITE Board is sponsoring for the first time a half-day summit April 19 aimed at bringing together educators, employers and students to discuss the opportunities in the IT field. The keynote speaker is A.J. Hyland, former CEO of Hyland Software in Westlake. “There’s a lack of understanding, not only among the kids but guidance counselors and teachers who don’t know what it means to be in IT,� Mr. Blausey said. “There are jobs at Eaton, Hyland or Microsoft, but to them IT is just the Internet and a phone.� That faulty perception of what a career in IT could include is the result of computer science’s diminishing role in middle and high schools, according to Paula Caso, a mathematics and computer science teacher at North Olmsted High School. Unlike in years past, if Ms. Caso
can’t enroll more than 15 students in her Advanced Placement computer science course, the class is axed from the course roster. She also noted there’s a hesitance to offer introductory computer courses due to budget constraints and staffing issues. “Unless they make computer science a requirement, it’s probably not going to last,� Ms. Caso said.
A taste of tech As such, local colleges are reaching out to students before they step on campus to promote their computer-related degree programs. Baldwin Wallace, for instance, this month will host a programming contest for high school students in conjunction with OEConnection, a Richfield-based company that provides online systems to car dealers and collision repair shops to help them find replacement parts. Part of the reason OEConnection linked up with Baldwin Wallace to sponsor the competition is to help shore up interest in the IT field because the company has had difficulty filling tech-related positions, said Amy French, its director of marketing and human resources. The University of Akron offers a series of “career explorations,â€? which allows students at the STEM (science, technology, engineering and mathematics) high school the university helped launch in Akron receive hands-on experience in disciplines they might not have considered as careers, including computer information systems. “There was this kind of unrealistic view that these are people who sit in a room all day and don’t interact with people, which isn’t true,â€? said Susan Ramlo, a professor and special projects coordinator for STEM education initiatives at the university. “We expose them to a broader view that working with computers might not be what they envision,â€? Dr. Ramlo said. While Dr. Ramlo said the University of Akron’s computer information systems program is bursting at the seams, the enrollment surge has been buoyed by nontraditional, older students looking for new career paths. Kent State University’s computer science program, meanwhile, has grown, in part due to a surge of international students, according to Javed Khan, the program’s chair. “As far as local talent, that’s less than what it is needed,â€? Dr. Khan said. “There is a bottleneck. If we do not train our own kids in computing, the need is so high we have to fill it up by immigrants.â€? â–
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Volume 34, Number 14 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly, except for combined issues on the fourth week of December and fifth week of December at 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113-1230. Copyright Š 2013 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. REPRINT INFORMATION: 800-290-5460 Ext. 136
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Cardinal: Company’s technology has it poised to capitalize on huge market continued from PAGE 1
■ Online fraud, which is growing in other countries. A new technology makes it harder for criminals to steal data from physical credit cards, so instead they’re trying to steal it from people who make purchases on the Internet, according to several sources. That same problem is expected to come to the United States over the next few years as the country switches to what often is called the “EMV” credit card system, a term that refers to its creators — Europay, MasterCard and Visa. U.S. banks already have started issuing credit cards with special computer chips that are harder to counterfeit than traditional magnetic stripes, and Visa and MasterCard in 2015 will start incentivizing retailers to accept the new cards. “When that happens, fraud leaps to less secure channels,” Mr. Keresman said. That problem represents an opportunity for CardinalCommerce. The company’s main product, Cardinal Sentinel, allows online retailers to accept more than 80 different alternative payment methods, such as PayPal and Google Wallet. It also helps retailers install security software that requires customers to enter a code or otherwise prove their identity before they make purchases.
In Select company Plus, CardinalCommerce has a new product that could do a lot to help it win over retailers that have been slow to adopt new security technology, said Karisse Hendrick, U.S. program manager for the Merchant Risk Council, a Seattle association that aims to help companies fight online fraud. The product, Cardinal Select, is designed to help retailers identify customers who are likely to commit fraud based on their location, the products they’re buying, the size of the order and several other factors. The technology should help merchants retain trustworthy shoppers, who wouldn’t need to enter a code or jump through other hoops to make purchases, Ms. Hendrick said. “No one wants to scare anyone away at the shopping cart level,” she said, adding that she doesn’t know of any other similar product. The company formally launched Cardinal Select at the Merchant Risk Council’s annual meeting in Las Vegas two weeks ago, where it was named the best new electronic payment technology developed by an established company. Jonathan Dick likes Cardinal Select, too. Mr. Dick is a managing director at the Mayfield Heights-based private equity firm Primus, which invested in CardinalCommerce in December. Primus typically makes investments in the $20 million to $50 million range, he said, noting that the CardinalCommerce investment was on the lower end of that range. Through its previous investment in medical equipment maker Steris Corp. of Mentor, Primus executives already knew Mr. Keresman, who previously was chief financial officer at Steris, and other members of CardinalCommerce’s board.
More than a billion served Primus also liked the company’s
“Every single remote transaction in the world.” – Jonathan Dick, managing director, Primus, on the potential market for CardinalCommerce’s software technology and the market CardinalCommerce is targeting. Like Mr. Keresman and Ms. Hendrick, Mr. Dick noted that online fraud in the United States is expected to increase when the country moves to EMV credit card technology.
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“It will help prevent fraud, ecommerce fraud, when there’s this sea change of EMV,” he said. CardinalCommerce had processed more than a billion transactions as of May 2012, up from 40 million in December 2006. The company makes a small amount of money on each purchase. So how big is the potential market for CardinalCommerce’s technology? Really, really big, Mr. Dick said. “Every single remote transaction in the world,” he said with a smile. ■
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Peter Fertig is a New Yorker with no ties to Cleveland. He was, however, a huge fan of the great Cleveland Indians pitcher Bob Feller, which led to the creation of an award that is believed to be the first combined effort between Major League Baseball and the U.S. Navy. Mr. Fertig co-authored a children’s book, “The Deal is on Strike Three,” which was based on the legendary poem “Casey at the Bat.” Mr. Feller contributed to the 2008 book’s introduction and appeared at two book signings at the National Baseball Hall of Fame and Museum in Cooperstown, N.Y. A friendship developed — and later, a tribute. After Mr. Feller died on Dec. 15, 2010, Mr. Fertig began to think of ways to honor the man with whom he formed a quick bond. “I was enamored with him, not from a baseball standpoint, but from a Navy standpoint,” said Mr. Fertig, a sales training manager for ADP in New York. “He just warmed my heart. He was kind enough to get involved with my book.” At age 23, Mr. Feller enlisted in the Navy after the attack on Pearl Harbor in 1941. He served almost four years during the prime of his baseball career, and still finished his 18-year Indians tenure with 266 victories and six 20-win seasons. Mr. Fertig wanted to add to Mr. Feller’s legacy. He wrote Mr. Feller’s wife, Anne, with a request. “I was wondering why nobody had ever connected the dots. He was in the Navy, in the Hall of Fame and was a member of the Cleveland Indians,” Mr. Fertig said. He told Anne Feller he wanted to create an award in her late husband’s honor. She liked the idea, and on March 28 of this year, the Indians announced the creation of The Bob Feller Act of Valor Award. The honor will be given each year to one Major League Baseball player, one Baseball Hall of Famer and one member of the Navy. The candidates will be judged on character, conduct and how they assist those less fortunate than themselves.
COURTESY CLEVELAND INDIANS ARCHIVES
Late pitcher Bob Feller won 266 games in 18 seasons with the Indians. ists for the award will be announced in Cleveland. Ms. Kertesz said the award’s board of directors will honor the nominees — though it’s highly unlikely the players, servicemen and/or servicewomen will be available — during a dinner on July 6 at a soon-to-be-announced location. The following day, July 7, the six finalists and one honoree from the Hall of Fame will be recognized prior to the Cleveland Indians’ 1:05 p.m. game against the Detroit Tigers at Progressive Field. The award’s board of directors — which includes Sam Misseri, vice president of business development for Shaheen Moving & Storage Services in Cleveland — will select the three major league finalists. The Navy will pick its three finalists, and Mr. Fertig and Mrs. Feller will select the honoree from the Baseball Hall of Fame. In subsequent years, the ceremony honoring the finalists will be held in the home city of the Hall of Fame honoree. As an example, Mr. Fertig said if Cal Ripken Jr. is the Hall of Famer honoree, the 2014 event would be held in Baltimore.
Nailing down details
‘We’re in giddy-up mode’
Mr. Fertig and a team of Cleveland businessmen and women have been busy planning three events tied to the award. Wendy Kertesz — a utility analyst with Business-Right Inc. who has significant public relations and marketing experience — said there will be an event in Cooperstown on May 25 to raise awareness of the award. Six weeks later, the three major league players and three members of the Navy who are selected as final-
Mr. Fertig found Mr. Misseri on LinkedIn, a social networking website. The former knew he needed people with strong Cleveland ties to accomplish his lofty goal, and the latter was happy to help. “I reached out to Sam, and he’s been absolute dynamite,” Mr. Fertig said. “He’s been my eyes and ears on the ground.” Mr. Misseri, a former pitcher who blew out his arm during his freshman year at Marietta College, also had met Mr. Feller.
“Baseball was the only thing I knew with 100% I wanted to do with my life,” Mr. Misseri said. “I had passion for other things, but I love baseball. Baseball taught me about teamwork, fundamentals … I can attribute everything I’ve ever learned to baseball — business development, raising my kids, everything.” Mr. Misseri, who lives close to Mr. Feller’s former home in Gates Mills, and Mr. Fertig enlisted the help of Pamela Willits, a writer and PR consultant in Cleveland, to develop a website for the award. Actofvaloraward.org is up and running, and Mr. Fertig feels as if his feet haven’t touched the ground in weeks. “Trying to connect four entities (Major League Baseball, the Indians, the Hall of Fame and the Navy) is like Einstein trying to split the atom,” he said. “That’s where we are now. We’re in giddy-up mode.”
A good American Everything is falling into place. The three award winners — one current major leaguer, one Hall of Famer and one member of the Navy — will be recognized on Veterans Day, Nov. 11, in Washington, D.C. It will be the culmination of a lot of work involving more than a few major entities, all of which greatly admire one of the best pitchers in baseball history. “When Bob was asked about his legacy, he said he wanted to be known as a good American,” Mr. Fertig said. “That’s what this award is about. He encapsulated three divisions in his life — the Cleveland Indians, the Baseball Hall of Fame and U.S. Navy.” ■
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Radio prodigy makes Metal meeting comes back to Cleveland facility lured Iron ‘crowdcasting’ a hit New and Steel group to town Listener Driven Radio attracts flock of stations with software that lets listeners pick the songs By CHUCK SODER csoder@crain.com
Daniel Anstandig hosted his own radio show at age 9, started an Internet radio station at 14 and sold the company that owned the station to Microsoft at 18. It’s no wonder that his latest radiorelated company is taking off. The number of radio stations that use Listener Driven Radio’s “crowdcasting” software — which allows listeners to pick the songs that play on the radio — jumped to 240 from 160 over the last six months. The Rocky River company also doubled its sales in 2012. That big influx of new business is the result of four years of work, according to Mr. Anstandig, now 29. Founded in 2009, Listener Driven Radio over that period has proven that its software can help increase ratings, web traffic and ad revenue, Mr. Anstandig said. “I think we reached a real tipping point in terms of showing a return on investment to stations,” he said. Mr. Anstandig gave several reasons for the increase: ■ The company, which refers to itself as LDR, recently has signed more high-profile deals that have helped it attract attention from other stations, he said. For instance, in January, a Tampa-area alternative rock station, WSUN-FM 97.1, started using LDR’s software to let listeners pick all songs that play on the station. ■ A growing number of LDR customers have been using the software long enough to see their ratings rise, Mr. Anstandig said. During those times of day when listeners can vote, two-thirds of LDR stations have witnessed a 30% increase in their ratings among their target demographic, year over year, he said. “It’s very hard to move ratings that dramatically,” he said.
and Rich Bonjorno, both of whom are executives with Zapis Capital Group, an investment firm in Westlake. LDR sometimes makes money by Anstandig selling its software, but it usually provides the technology for free and makes money by selling ads that run on stations using the system. Now LDR is going after more international customers, which are more willing to pay cash, Mr. Anstandig said. The company on March 19 formed a partnership with Oxis Media of Oxford, England, which will promote LDR’s software in Europe. Radio stations in other countries tend to be more open to new ideas because on average they’re younger than stations in the United States, said Mr. Zapis, who previously ran Zapis Communications, which owned several radio stations in Northeast Ohio and other parts of the country. “Internationally, they’re not as entrenched with legacy systems and ideas of how radio should be programmed,” Mr. Zapis said.
Mr. Anstandig was a student at Beachwood High School when Mr. Zapis met him at a broadcasting conference in Las Vegas. “He’s kind of an old soul. He’s very mature for his age,” Mr. Zapis said. At age 9, Mr. Anstandig began hosting a kids show on WELW-AM in Willoughby. At 14 he started DAER Media, which sold ad time for Internet radio stations across the country and ran a few Internet stations of its own, including a soft rock station he started in his bedroom.
– Lee Zapis, principal, Zapis Capital Group; investor, Listener Driven Radio
International flair The 17-person company — based in a second-floor office that looks down on the boutique stores and restaurants in Rocky River’s Old River Shopping Area — has been profitable since Mr. Anstandig started the business with local investors Lee Zapis
Steel really is making a comeback — especially to downtown Cleveland. No, ArcelorMittal is not planning a new mill at its complex in the Flats. But in the spring of 2015, some 8,000 steel industry participants are expected to attend the Iron & Steel Technology Conference at the Cleveland Convention Center, which is scheduled for completion this June. Held by the Association for Iron and Steel Technology (AIST), the event is returning to Cleveland after a nine-year hiatus following its last appearance here in 2006. Local tourism officials at Positively Cleveland have been working for four years to get the show scheduled here again and finally did so, now that they have a new convention center to market, said Positively Cleveland CEO David Gilbert. “It is through the combination of a longstanding relationship with AIST and a new convention facility that we were able to bring back a convention that will contribute more
COURTESY TURNER CONSTRUCTION COMPANY
An aerial view of Mall B, the location of the new convention center than $9 million to Cleveland’s economy,” Mr. Gilbert said in a statement announcing the convention. This year’s AIST convention is set for May 6-9 in Pittsburgh, where more than 500 companies from dozens of countries will occupy 237,000 square feet of exhibit space. Positively Cleveland says Cleveland can expect an event of similar magnitude — and one that will keep downtown hotels busy with about 6,100 hotel-room nights to be sold. AIST participants will be on familiar ground. Cleveland was long a favored spot for the group, which has held its big annual event in Cleveland 34
ON THE WEB: Read more about the impact of the convention center and Global Center for Health Innovation. www.crainscleveland.com/medmart times since it was initiated in 1907, said Positively Cleveland spokeswoman Jackie Spencer. Ms. Spencer said the convention center was the main selling point in bringing the association back, though she noted that a host of downtown improvements — including the redevelopment of Euclid Avenue, more hot spots on East 4th Street and a new casino at Public Square — all likely helped to close the deal. ■
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What were you doing at age 9?
“He’s kind of an old soul. He’s very mature for his age.” ■ The company has had extra help promoting its products: Premiere Networks Inc. began selling LDR’s software across the United States in early 2012. The subsidiary of Clear Channel Communications syndicates 90 radio programs by hosts such as Rush Limbaugh and Ryan Seacrest. ■ LDR has a new software product that’s proving popular. The company in March 2012 released TopicPulse, which allows radio stations to see what topics their listeners are interested in at any given moment by analyzing content on local social media and news websites. About 15% of LDR’s customers use TopicPulse, which is meant to help talk show hosts, disc jockeys and radio news reporters spot topics that might grab the attention of local listeners.
By DAN SHINGLER dshingler.crain.com
His teachers in high school gave him a lot of flexibility, Mr. Anstandig said. “For a week and a half I would go to school, and then for a couple days … I would be on the road visiting one of our sales offices in New York or L.A., Dallas, Atlanta, Chicago,” he said. Mr. Anstandig sold the company — he wouldn’t say how much Microsoft paid — just before earning his diploma in 2001. He briefly attended John Carroll University (he started helping out at the college’s radio station when he was 12), but he soon left so he could focus on his job as a radio station consultant for McVay Media in Westlake. In 2005, he helped the company launch a digital-focused consultancy called McVay New Media. “He was aware of every single digital initiative that was going on in the radio industry,” Mr. Zapis said. Being so obsessed with radio, does Mr. Anstandig have a favorite band or style of music? Nope. The dial’s always moving. “You name it, I listen to it all,” he said. ■
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Eaton parts in the building include its Foreseer monitoring system, which enables users to monitor critical power, environmental, safety and security systems to prevent failures and cut energy use. A solar installation atop the parking garage uses the company’s S-Max 250Kw technology that converts electricity from solar panels to electricity suitable for the power grid. In the building also are found Eaton backup power systems (it calls them uninterruptible power systems), variable speed drives that control motors in the heating, ventilating and air conditioning system, and switch gears, lighting controls, meters and preconfigured panel boards that hold building wiring and help eliminate construction waste. The building also uses lights from Cooper Industries Inc., an acquisition last year that produced a new combined company based in Ireland. However, the most visible Eaton product here is found in the garage, which boasts two rows of Eatonproduced electric vehicle charging stations. Eaton spokesman Scott Schroeder said Eaton electrical parts are the most commonly used Eaton parts in the building, which was designed by the Pickard Chilton Inc. architecture firm of New Haven, Conn.
NEW EATON CENTER: BY THE NUMBERS
The structure is designed so employees and visitors entering the first-floor lobby from the attached garage pass a series of mural-size panels of photographs of buildings, cars and tractors that incorporate Eaton products. As a visitor approaches each picture, layers of panels called lenticulars allow parts of the picture to fade away, revealing in the proper location a three-dimensional draw-
ing of the Eaton product or products inside the equipment. The viewer’s perspective on each part changes as he or she walks past each picture. The company calls the hallway, lobby and first-floor conference rooms the “Eaton Experience.” The conference rooms also function as Eaton University to help educate Eaton employees, suppliers and customers. Mr. Cutler said the new Eaton Center has hundred of visitors every day on company business. In remarks during last week’s dedication to an audience of Eaton executives, past board members, public officials and the media, Mr. Cutler said the new building is designed to foster collaboration among employees more than was possible when the company was in the 28-story former Eaton Center, 1111 Superior Ave., in downtown Cleveland. “It’s an environment where you see outside the windows wild turkey, coyotes and geese,” Mr. Cutler said. “It’s quite a change from Superior Avenue.” However, his remarks showed it’s also an atmosphere for business at a company well-known for a strong work ethic. Noting the walking trails traversing the office campus, Mr. Cutler said he looked forward to performing his first performance review while walking them. ■
AxioMed’s first product, the Freedom Lumbar Disc, received the CE Mark in 2009 and has been used to treat over 500 patients. Patrick McBrayer, president and CEO, said in a statement that the patent “augments AxioMed’s intellectual property, including an extensive patent portfolio, exclusive rights to the polymer for our Freedom Lumbar and Cervical discs and trade secret assets on device assembly.” ■ The city of Alliance has joined a growing list of Northeast Ohio cities that have created funds for startup companies. Alliance is working with the Technology Accelerator Alliance business incubator to launch a fund that plans to make loans to young technology companies.
The Alliance Startup Fund would make payment-deferred loans of up to $35,000 to startups. To be eligible, the companies must be based in Alliance or commit to moving to the city, according to a media alert announcing an event organized to mark the launch. The free, public event is set for 5 p.m. to 7 p.m. on April 18 at the University of Mount Union, which is where the Technology Accelerator Alliance is based. The “TA2” incubator provides physical space for startups and “oversees an intense, mentor-driven” program designed to help tech startups grow, according to the organization’s website. The fund was launched with the help of JumpStart, a Cleveland nonprofit that assists and invests in tech startups. JumpStart has helped launch similar funds in other cities. ■
■ Building: 600,000 square feet, including a fitness and health center, Eaton University, the Eaton Experience Center and attached parking garage. ■ Site: 53 acres ■ Employees in Beachwood: 700, with capacity for 1,000. Including food service and other vendors, 1,000 people now work at the campus. Eaton has 103,000 employees worldwide. ■ Interior design: Open so that most employees can see natural daylight. ... Includes a rainwater reuse system that will help reduce water consumption by 40%. ■ Eaton has been located at its former headquarters at 1111 Superior Ave. since 1984. ■ Eaton has been in Cleveland since 1914, when the company was moved here from Bloomfield, N.J. SOURCE: EATON CORP.
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Bright Spots is a period feature in Crain’s highlighting positive business developments in the region. To submit information, email Scott Suttell at ssuttell@crain.com. ■ AxioMed Spine Corp. in Garfield Heights said it has secured a key U.S. patent that covers a device for replacing a damaged spinal disc. AxioMed said the key feature of the patent is the trapezoidal shape that is said to be a closer approximation of the spinal disc anatomy. The company said the initial application of this invention is in the Freedom Cervical Disc, which last year received the CE Mark for distribution in the European Union.
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MANUFACTURING EBO GROUP INC.: Scott A. Dwyer to COO. ROLL-KRAFT: Jacob Bohinc and Tyler Kirby to shipping clerks; Billy Breeding to ID grinder; Jim Donaldson to driver. TIMKEN CO.: Shaun M. Branon to director, global talent acquisition; Jeffrey L. Hill to plant manager, Niles Service Center.
MARKETING BROKAW: Dave Muller to associate creative director. THINK MEDIA STUDIOS: Julia Thorndike to associate producer.
NONPROFIT GIRL SCOUTS OF NORTH EAST OHIO: Jane Christyson to CEO. UNIVERSITY SETTLEMENT: Roslyn Chao to director of development.
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SERVICE CORPORATE UNITED: Keleree Conrad to vice president, member development; Jennifer Frimel to vice president, marketing; Emily Sedlak to operations coordinator; Maura Slater and Lisa Wittmer to managers, category development. EXPERIENT: Barbara Herod to vice president, association sales. IMAGE LAB MEDIA SERVICES: Giselle Fleming to manager, sales, marketing and public relations.
BOARDS ESPERANZA INC.: Felicia Soto (JPMorgan Chase) to president; Maria Haller to first vice president; Maribel Verdon to second vice president; Andrew Connors to treasurer; Jane Nedley to secretary. FIELDSTONE FARM THERAPEUTIC RIDING CENTER: Elizabeth B. Juliano (Litigation Management Inc.) to chair; Thomas Rathbone to president; Lynnette R.
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PUBLISHER/EDITORIAL DIRECTOR:
Brian D. Tucker (btucker@crain.com) EDITOR:
Mark Dodosh (mdodosh@crain.com) MANAGING EDITOR:
Scott Suttell (ssuttell@crain.com)
OPINION
Kill cafés II
T
he Ohio Senate’s reluctance to move along a bill that would squelch Internet cafés gives us a sick sense of déjà vu. We hope we aren’t witnessing a re-run of late 2012, when a similar measure emerged from the House only to die in the upper chamber of the Legislature. No credible reason exists for the Senate to delay action on House Bill 7, which would restrict the prizes these poorly regulated operations can award the people who play their slots-like “sweepstakes” games. The excuses that the cafés provide jobs and tax revenues in the towns where they operate don’t justify the continued existence of these businesses, which are gambling parlors, pure and simple. Neither does the flimsy argument that the cafés provide needed competition to the gambling monopolies enjoyed by the state with its lottery and by the private interests that own Ohio’s four casinos. Voters 40 years ago approved a constitutional amendment that created the Ohio Lottery. Nearly four decades later, they authorized by constitutional amendment the four casinos. It was voters who, for better or worse, gave their blessings to these constitutionally sanctioned monopolistic arrangements. They have yet to give such approval to gambling at Internet cafés. And that, in our view, makes the cafés businesses engaged in activities they should not be under the law. The Senate could put the clamps on the cafés by approving HB 7. The foot dragging by the chamber in dealing with the bill doesn’t reflect well on the caliber of its leadership, nor on the collective wisdom of its big Republican majority. The Ohio Constitution makes clear what they should do. Now, they need to do it.
Toll tale II
S
orry, all you lovers of the Ohio Turnpike, but we’re not ready to shout hosannas from the rooftop about the transportation budget bill Gov. John Kasich signed last week. It’s not that we aren’t glad the turnpike remains in the state’s hands under the bill. We hated the idea pursued by Gov. Kasich of leasing the turnpike to a third party in order to reap a bucketful of dough for infrastructure investments. The governor wisely relented and instead adopted a plan to expand the authority of the Ohio Turnpike Commission so that it can sell bonds for highway and bridge projects that aren’t connected to the turnpike. The bill on its face sounds like a great deal for this region, as 90% of the bond proceeds are supposed to go to projects in northern Ohio. Our hesitation in giving a big “hurrah” to the bill comes in wondering whether the bond money will reduce over time the share of state transportation dollars Northeast Ohio receives from the state gasoline taxes its residents pay. It likely will be years before we know whether the turnpike produces a windfall for Northeast Ohio or simply serves as a substitute for gas tax money that should be ours but winds up in roads and bridges downstate. We will be watching …
FROM THE EDITOR
Arts for more than art’s sake the Gulf of Mexico are so clear at Siesta ultural amenities matter — or, Key that you can see your feet while at least they matter to me. And I chest-deep in them, and the beach’s think they matter to plenty of powdery sand never gets hot no other people, too. matter how high the therI would not want to live in a MARK mometer goes. place where there wasn’t plenty DODOSH But after a day decompressof access to live theater and the ing at a place that makes the performing arts. Heck, I don’t “best beaches in the United even like to visit places where States” list of many travel webthey are not available. sites, I want something more It’s one reason I like to vacathan a tall, cool drink at a tiki tion in the Sarasota area of bar. Sarasota can satisfy my culFlorida. You can catch rays tural thirst just fine. pretty much anywhere in the On our trip to Siesta Sunshine State. But once the Key/Sarasota two weeks ago, my wife and sun goes down, the number of cities I visited the Ringling Museum, which is along the Gulf and Atlantic coasts that the legacy of circus king John Ringling (of offer the cultural options I’ve grown Ringling Bros./Barnum & Bailey fame) accustomed to in Cleveland are few. and his wife, Mabel, to the people of Now, as my late father-in-law, Victor Florida. There, for a single $25 admission, Serrill, used to say, “Don’t get me a visitor can take in the abundant collecwrong.” I love soaking up the sun while tion of the Ringling Museum of Art, the reading a book with the sand between Circus Museums, and Cà d’Zan (“House my toes, and there are few beaches of John” in Venetian dialect), the palatial where I’d rather engage in that activity mansion John and Mable Ringling built in than the beach at Siesta Key, which is the 1920s during America’s Gilded Age. separated from the rest of Sarasota by We also discovered Florida Studio the Intracoastal Waterway. The waters of
C
Theatre, which sits in downtown Sarasota and reminds a Clevelander of PlayhouseSquare, only on a smaller scale. It is a cool little village of four theaters, two of which are cabaret style. Florida Studio Theatre claims more than 25,000 subscribers, which could explain why I couldn’t get tickets to the almost-nightly tribute to the music of Ira and George Gershwin at the Goldstein Cabaret even though I went online a month before our visit to buy them. So, instead we saw “Urban Cowboys,” a fun revue of the music of country artists such as Dolly Parton, Kenny Rogers and George Strait that was staged in the intimate, 109-seat John C. Court Cabaret. It was a delight, and for $29 a seat, the price was right, too. If I am impressed with Sarasota’s cultural offerings, imagine how visitors to Cleveland must feel when they encounter our city’s rich and diverse cultural treasures. They help sell the city to out-of-towners, and provide enriching experiences for those of us fortunate enough to live here. May we never take them for granted. ■
THE BIG ISSUE It looks fairly likely that Cuyahoga County Ed FitzGerald will take on Gov. John Kasich in the next gubernatorial election. How do you feel about Mr. FitzGerald’s chances?
MARTIN MANGAN
CHRISTENEYES NEMETH
JULIUS WATSON IV
DANE LUPSON
Cleveland
Brook Park
Cleveland Heights
Lakewood
I think Kasich is doing a pretty good job. … I guess the economy will be judge of that.
Probably pretty good. I don’t think Kasich is doing that good of a job. It seems like a lot of things are still broken.
Very slim. People think (Gov. Kasich) is not doing a good job, but actually to me he is. Things need to change, and he has the backing to change them.
It just depends if his notoriety, name and brand can extend outside of Cuyahoga County enough to carry enough cachet with voters.
➤➤ Watch more people weigh in by visiting the Multimedia section at www.CrainsCleveland.com.
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Investment in efficiency can pay off from the start Companies in state energy program for manufacturers believe it’s worth the effort By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com
Each year, state officials estimate, Ohio companies that take part in the Energy Efficiency Program for Manufacturers save enough energy to power more than 30,000 homes. That’s equal to about $13 million in savings annually, said Chad Smith, deputy chief of the Office of Energy at the Ohio Development Services Agency. The program helps companies design and implement strategies that save energy — and money — and gives them the financing to do so. The development services agency made a shift from grants to low-interest loans in late 2011 to ensure the sustainability of the program, said Penny Martin, a spokeswoman for the agency. About 300 manufacturers have taken part in the program since it began in 2002, and the state has invested about $25 million to implement the energy-saving plans. “One of Ohio’s strengths is manufacturing,� Mr. Smith said, and manufacturers always will need to control energy costs. The state wants to help make its manufacturers more competitive by lowering their costs, he said. There is a special page on the development service agency’s website dedicated to the program that features 10 successful case studies from companies including Cleveland Gear Co. and Omnova Solutions Inc. Rich Nyce, facilities manager at Cleveland Gear, a gear manufacturer, said the program helped his company achieve meaningful cost reductions. Cleveland Gear saw big changes in its energy usage by updating its air conditioning and heating systems and by replacing hundreds of inefficient fluorescent lights with more energy-efficient fixtures. The factory runs 24 hours a day, seven days a week, so small savings add up over time. Bob Wightman, vice president of finance, estimated those savings equal $80,000 to $85,000 a year. Cleveland Gear’s electric bill alone has been reduced by about 25%, he said. “It’s amazing,� Mr. Wightman said. Cleveland Gear’s building was
about 100 years old and in need of updates, Mr. Wightman said. The assistance from the state — a grant of approximately $145,000, equal to half the total cost of the two-year project — made it so the company could justify the expenses.
Out with the old Money for the program has varied since it was created about 10 years ago and has included state and federal funds. The program saw a big increase in 2009 to 2011 because of the American Recovery and Reinvestment Act. But while the financing streams have varied, the program’s four-step process — which recently earned it an “Inspiring Efficiency Award� in innovation from the Midwest Energy Efficiency Alliance — has been a constant. Businesses can take part in any number of the program’s four phases. In the first phase, a company assesses its energy use with a facilitator. In the second phase, the company goes through a full building audit and develops a customized plan for energy efficiency. The third phase is implementation of the plan, and the fourth phase is made up of ongoing monitoring of the changes. Ms. Martin said the first and fourth phases of the plan are paid for by the state. At present, businesses can receive up to a 50% reimbursement from the state for the second step, and a loan for the third. Jeff Blake, a manufacturing engineering manager at Parker Hannifin Corp.’s Parflex division in Ravenna, said the energy audit was particularly useful to his plant. The report, which was more than 60 pages long, showed exactly how energy was used in the plant. Before the audit, the company knew energy was wasted, but executives only had assumptions of where the big losses were occurring. Parker Hannifin, which produces motion and control technologies, received a grant of $320,000 to replace and update its dryers, which are used to dry resins. Previously, the dryers heated air constantly, regardless of whether the hopper above it was filled with material to be dried, Mr. Blake said. The new dryers were joined together in clusters, with one central dryer
MORE INFORMATION According to the state’s website, the Ohio Development Services Agency “works to grow the economy of the state by connecting companies and communities to financial and technical resources (to) increase efficiency and deploy advanced energy technologies.� Contact the agency at: Development Services Agency; Office of Energy; 77 South High Street, 26th Floor; P.O. Box 1001; Columbus 43216-1001; Phone: 614-466-6797; Fax: 614-466-1864; Email: energy@development.ohio.gov drying the air and individual heaters only turning on when the hopper is used. The dryers now use about 65% less energy, Mr. Blake said, resulting in a 10% reduction in energy consumptionfor the whole plant. The state aid helped the company justify spending money to replace the outdated equipment, he said.
Cozying up to savings The length and scope of an energy-efficiency project depends on the company. Omnova, a Fairlawn-based producer of specialty chemicals and emulsion polymers, spent about eight months doing preparations and eight more implementing the changes, said John Finn, its director of environmental affairs. The bulk of the program was done in 2011. Mr. Finn said Omnova seeks out grants and rebate programs for energy conservation projects. For this project, Omnova received about $250,000 from the state to update the outdated utilities systems at its 50-year-old global technology center in Akron, and the company matched it. Mr. Finn said the building had a costly utilities system, and that it was hard to maintain comfortable temperatures for all employees throughout the building. The building had a mix of old, inefficient heating and cooling systems that were replaced with highefficiency systems. The building now uses indirect gas-fired units for heating and fan motors for cooling. The company also installed better air distribution systems and automatic controls. Mr. Finn estimated the reduced natural gas and electrical usage has led to about $82,000 a year in savings. The company’s most recent annual utility costs at the Akron tech center were about $475,000, he said. â–
Vast majority of employers contribute to 401(k) plans By JERRY GEISEL Business Insurance
More than two-thirds of employers with 401(k) plans match employees’ salary deferrals, with the largest employers most likely to do so, according to an Internal Revenue Service survey released last week. In all, 68% of 401(k) plans match employees’ contributions. That figure rises to 81% of plans with 101 to 2,500 participants, and 90% of plans with more than 2,500 participants. By contrast, only 59% of plans with five or fewer participants
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offered a 401(k) match, as did 68% of plans with between six and 100 participants. The likelihood that employers cash out, or require employees to take their 401(k) account balance when terminating employment, also varies by plan size. Under the law, such involuntary distributions are allowed for account balances that are $5,000 or less. For example, 87% of plans with more than 2,500 participants have an involuntary cash-out feature, as do 83% of plans with 101 to 2,500 participants. Only 59% of plans with five or fewer participants have
such a feature, while 73% of plans with six to 100 participants have an involuntary cash-out feature. The survey is based on information filed with the IRS by just over 1,000 employers. The IRS noted that 401(k) plans have become the “most prevalent form of retirement plan in the United States,� adding that employers now sponsor more than half a million 401(k) plans, with the plans covering about 60 million people. ■Jerry Geisel is editor-at-large with Business Insurance, a sister publication of Crain’s Cleveland Business.
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TAX LIENS The Internal Revenue Service filed tax liens against the following businesses in the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protect the interests of the federal government. The lien is a public notice to creditors that the government has a claim against a company’s property. Liens reported here are $5,000 and higher. Dates listed are the dates the documents were filed in the Recorder’s Office.
LIENS FILED NRC Staffing Inc. 100 N. Main St., Chagrin Falls ID: 20-0461614 Date filed: Feb. 7, 2013 Type: Employer’s withholding, failure to file complete return Amount: $205,802 Edward H Sutton Insurance Agency Inc. P.O. Box 39265, Cleveland ID: 34-0566260 Date filed: Feb. 28, 2013 Type: Employer’s withholding Amount: $182,519 R & H Industries Inc. 3155 W. 33 St., Cleveland ID: 34-1151436 Date filed: Feb. 12, 2013 Type: Employer’s withholding, unemployment, failure to file complete return, corporate income
Amount: $147,460 Edw H Sutton Insurance Agency Inc. P.O. Box 39265, Cleveland ID: 34-0566260 Date filed: Feb. 28, 2013 Type: Employer’s withholding, unemployment, corporate income Amount: $130,384 Heavenly Kids LLC 17150 Broadway Ave., Maple Heights ID: 06-1744917 Date filed: Feb. 28, 2013 Type: Employer’s withholding, failure to file complete return Amount: $101,027 Leads Syndicate Group LLC 12904 Kadel Ave., Cleveland ID: 27-3149474 Date filed: Feb. 5, 2013 Type: Corporate income Amount: $95,297 Cleveland Industrial Concrete Floors Inc. 13200 York Delta Drive, North Royalton ID: 34-1785375 Date filed: Feb. 28, 2013 Type: Employer’s withholding Amount: $88,274 Unity of Greater Cleveland 3445 Warrensville Center Road, Shaker Heights ID: 34-1451541
Date filed: Feb. 7, 2013 Type: Employer’s withholding, failure to file complete return Amount: $74,999 Surocshaker Inc. Sushi Rock 1276 W. 6th St., Cleveland ID: 55-0881729 Date filed: Feb. 12, 2013 Type: Employer’s withholding Amount: $72,510 Anthony Roccos Hair Design, a partnership 6124 Highland Road, Highland Heights ID: 04-3726680 Date filed: Feb. 28, 2013 Type: Employer’s withholding, unemployment, partnership income Amount: $49,717 Mt. Sinai Baptist Church 7510 Woodland Ave., Cleveland ID: 34-0813428 Date filed: Feb. 7, 2013 Type: Failure to file complete return Amount: $44,845 Cleveland Demolition LLC 21695 Foster Road, Wellington ID: 26-4582085 Date filed: Feb. 5, 2013 Type: Employer’s withholding Amount: $40,823 Fifth Church of God 2182 E. 38 St., Cleveland ID: 34-1286929 Date filed: Feb. 7, 2013
Type: Employer’s withholding Amount: $39,767 Diez Hermanos Inc. 1541 Golden Gate Plaza, Mayfield Heights ID: 27-1256184 Date filed: Feb. 12, 2013 Type: Employer’s withholding Amount: $34,130 Anthony Roccos Hair Design, a partnership 6124 Highland Road, Highland Heights ID: 04-3726680 Date filed: Feb. 28, 2013 Type: Employer’s withholding, unemployment, failure to file complete return, partnership income Amount: $31,001 Lakewood Phoenix Inc. Phoenix Coffee 15118 Detroit Ave., Lakewood ID: 34-1792124 Date filed: Feb. 28, 2013 Type: Employer’s withholding Amount: $29,484 Firestop Solutions & Systems Inc. 23860 Miles Road, Suite N., Cleveland ID: 26-0149588 Date filed: Feb. 12, 2013 Type: Employer’s withholding Amount: $28,555 Nida Enterprises Inc. 1470 Orchard Grove Ave., Lakewood ID: 34-1759848 Date filed: Feb. 7, 2013 Type: Employer’s withholding, corporate income Amount: $23,805 PGT Construction Inc. 9900 York Theta Drive, North Royalton ID: 20-1054167 Date filed: Feb. 7, 2013 Type: Employer’s withholding Amount: $22,641 Security Management Group Inc. 3740 Euclid Ave., Suite 102, Cleveland ID: 26-3798129 Date filed: Feb. 28, 2013 Type: Employer’s withholding Amount: $22,144 Comfort Wear Inc. 2261 Warrensville Center Road, University Heights ID: 31-1502585 Date filed: Feb. 27, 2013 Type: Failure to file complete return Amount: $21,457
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Caver Brothers Inc. 3770 E. 93 St., Cleveland ID: 34-1823254 Date filed: Feb. 28, 2013 Type: Failure to file complete return Amount: $17,225
North Shore Elite Properties Just Like Moms Restaurant 3030 Superior Ave., Cleveland ID: 26-4146651 Date filed: Feb. 5, 2013 Type: Employer’s withholding, failure to file complete return Amount: $19,325 Cornerstone Missionary Baptist Church Inc. 8915 Miles Park Ave., Cleveland ID: 34-1438780 Date filed: Feb. 7, 2013 Type: Employer’s withholding, failure to file complete return Amount: $17,660
Capital Concrete & Waterproofing Inc. 5006 Lincoln Ave., Parma ID: 20-3056850 Date filed: Feb. 12, 2013 Type: Employer’s withholding, unemployment, corporate income Amount: $17,116 Bar West, Red Lantern 17446 Lorain Ave., Cleveland ID: 34-1279547 Date filed: Feb. 7, 2013 Type: Employer’s withholding Amount: $15,575 Treasure in Heaven Ministries, Thrift Nation 6286 Pearl Road, Parma Heights ID: 27-1837702 Date filed: Feb. 27, 2013 Type: Employer’s withholding Amount: $14,891 Unlimited Group Inc. 13705 Madison Ave., Suite 7, Lakewood ID: 26-1380118 Date filed: Feb. 28, 2013 Type: Employer’s withholding Amount: $14.178 Euclid Foreign Motors Inc. 20020 Saint Clair Ave., Cleveland ID: 34-1087596 Date filed: Feb. 27, 2013 Type: Employer’s withholding Amount: $14,140 Green Thumb Florists Garden Center and Landscapers Inc. 11515 Lorain Ave., Cleveland ID: 34-1824632 Date filed: Feb. 27, 2013 Type: Employer’s withholding Amount: $13,672 Larisa LLC 30111 Lorain Road, North Olmsted ID: 83-0384045 Date filed: Feb. 5, 2013 Type: Employer’s withholding Amount: $13,135 Paul Holdings LTD 559 Prospect St., Berea ID: 20-3524628 Date filed: Feb. 27, 2013 Type: Employer’s withholding, partnership income Amount: $11,042 Benjamin P Wright & Associates Co. LLC, Wright Renovations & Kitchens Corp. 1387 Mathews Ave., Lakewood ID: 20-3175433 Date filed: Feb. 28, 2013 Type: Employer’s withholding, unemployment Amount: $10,155 Fi Deli Express Inc. Deli Express Food Stores 7893 W. 130 St., Parma ID: 13-4347333 Date filed: Feb. 27, 2013 Type: Employer’s withholding Amount: $9,661
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Humor can pay the bills Locally produced Funny Times has national following, $1.6M gross revenue By SHARON SCHNALL clbfreelancer@crain.com
O JENNIFER KEIRN PHOTOS
Jackie Adamany wholesales her Blue Orchid Handbags to more than 30 boutiques in the U.S. and Canada. She also created a consulting service, Handcraft Your Career, and wrote a book.
CRAFTING A PLAN IS A WORK OF ART Creative types often need help selling their products By JENNIFER KEIRN clbfreelancer@crain.com
I
t was the moment that Jackie Adamany had dreamed would come. A boutique owner had seen Ms. Adamany’s handmade fabric purses and contacted her requesting a buyer’s packet, which retailers use to evaluate new wholesalers. She panicked. “I spent all weekend Googling ‘how to create a buyer’s packet,’ ” said Ms. Adamany, owner of Blue Orchid Handbags. “It was horrible.” So she began the trial-and-error process of learning to sell her work wholesale, reaching out to networking groups, soliciting feedback from helpful shop owners and even spending a few thousand dollars on online resources. “The knowledge I got was incredible … but I thought, ‘there has to be a better way,’ ” Ms. Adamany said. She used that hard-earned knowledge — as well as her background in marketing and graphic design — to create a consulting service she calls Handcraft Your Career. She also wrote a book and created a seminar series in conjunction with art show organizer Lisa Nemeth of Northcoast Promotions to help artists and craftspeople turn their art into a business. See ART Page 14
wning and operating a business requires purpose, planning, skill and vision. That maxim applies even when the entity is called Funny Times. While business and editorial savvy are behind the Cleveland Heights-based publishing business’ 28-year run, owners Ray Lesser and Sue Wolpert, staff and contributors Lesser have had a good time along the way. “Everything we do is very well thought out,” said managing editor Sandee Beyerle. “The content of the business, of the paper, is very funny; the workplace is fun, but it’s a serious business.” The newspaper, founded in 1985 and originally known as The Funny Times, started as a free, local bi-weekly, stewarded from the married owners’ home. Today, the nationally distributed monthly Funny Times has 67,000 subscribers served by nine full- and part-time employees. Staff members work in a 2,500-square-foot upstairs space of a circa-1920s building purchased by the owners in 1995. “It’s the ‘Best of the Best’ of American humor,” owner Ray Lesser said. “I compare Funny Times to a regular newspaper. We have humor representing just about every subject: business, travel, politics, news, computers, technology, science, modern life.”
‘Our life was going to work’ Each 24-page issue features more than 100 cartoons provided by 60 artists, whose work is acquired through direct submission and syndicated arrangements. Additionally, 10 to 15 contributors provide written content, he said. “They pick quality cartoons and put them together in an accessible magazine. The levity deals with issues of the day without getting sanctimonious or too heavy about it,” said Matt Wuerker, a longtime Jackie Adamany displays her handbags.
See HUMOR Page 14
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Humor: Publication is available on iTunes, Kindle continued from PAGE 13
Funny Times contributor. Mr. Wuerker is the 2012 Pulitzer Prize winner for editorial cartooning and a staff cartoonist for Politico, a Washington, D.C.-based publication. The Funny Times website offers poignant narrative about the paper’s inspiration and inception. While living in Athens, Ohio, the couple experienced both the stillborn birth of their first child and the news that Ms. Wolpert’s father was diagnosed with Alzheimer’s disease. Self-exploration accompanied a road trip that took them to Santa Cruz, Calif., where they discovered a local humor newspaper. What followed before launching The Funny Times in their childhood hometown included: talking to that California publication’s founder, a return trip and two nights of training at an Athens, Ohio publication. “We were young people; we were really confused; we were heartbroken,” Ms. Wolpert said.
“This whole thing came out of this horrible challenge. We decided we were not going to be losers. Our life was going to work.” How did family and friends respond to their idea to start a humor publication? “Everybody told us we were nuts,” she said. Personal savings financed the startup. Early on, the business remained viable because the owners wore many work hats; trading advertisement space for merchant goods and services further aided and abetted survival.
Goodbye local, hello national In 1989, the couple nationally launched the renamed Funny Times, a monthly publication with increased humor and editorial content and no advertisements. The business already had 600 national subscribers from its local incarnation. Two initial direct mailings of 10,000 each collectively yielded 1,200 responses — all with paid subscriptions.
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“We didn’t cash anything. We waited until the final results. We didn’t want to commit mail fraud,” Mr. Lesser said. The unprocessed subscriptions were stored in a home shoebox, where they remained until Mr. Lesser’s brother visited. Seeing the box stuffed with unrealized revenues, the brother admonished Mr. Lesser to process the orders. A personal loan from Ms. Wolpert’s maternal grandmother and reinvested subscription monies fueled the business. By 1989’s close, Funny Times had 10,000 subscribers, the free bi-weekly stopped publication, and the grandmother’s loan was repaid. The business was making money — and continues to make money and make people laugh. Last year’s gross revenues totaled $1.6 million, Mr. Lesser said. Revenues primarily come from subscriptions: $26 for a one-year print edition; a small portion of sales are generated from T-shirt and other product sales.
Last October, an electronic version, including one year of downloads for $19.99, became available through the iTunes store; the Kindle Fire electronic version was released last month through Amazon.
Future direction In 2012, responding to a consultant’s recommendation, Mr. Lesser and Ms. Wolpert recruited professionals for a six-person board to advise them about ownership, succession and future direction. The advisory board poses questions about “success in the face of the dynamic, changing nature of the publishing industry …What can Funny Times be in the reality of the Internet age? How does the audience value Funny Times?” said board member Steven Tatar, president of Ohio Knitting Mills of Cleveland. Ms. Wolpert is now a consultant specializing in community building and organizing. She earned a master’s degree in positive organization development, in 2011, at the Weatherhead School of Manage-
The cover of the Funny Times from November 2012. ment at Case Western Reserve University. While remaining a cognizant owner, Ms. Wolpert said she does not routinely participate in daily operational matters. What happens next could someday involve the couple’s three children. No decisions have been finalized, but one factor seems assured. “What is not going to go away is humor and the need for humor in the United States. Funny Times is a very viable product,” Mr. Lesser said. ■
Art: Organizations willing to lend hand continued from PAGE 13
“Many are all about their art … they don’t want to have to deal with things like marketing and a business plan,” said Ms. Adamany, who now wholesales her handbags to more than 30 boutiques in the U.S. and Canada. The stereotypical head-in-theclouds artist who’s ill-suited for entrepreneurship certainly exists, but plenty of Cleveland artists are
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achieving small business success through creative ventures. “Some artists bristle at the idea of being considered an entrepreneur … they don’t want to feel they are sacrificing their work to the masses,” said Megan Van Voorhis, chief operating officer of the Community Partnership for Arts and Culture (CPAC). “The ones who are doing well are out there beating the bushes and getting engaged in the community.”
“I think that all of the resources they need are out there, but they are not always easy to find,” agreed Deidre McPherson, the COSE marketing manager who works most closely with local artists. COSE’s Arts Network, a longtime supporter of local art-fueled businesses, is currently undergoing reorganization, but still collaborates with CPAC on the six-week Artist as Entrepreneur Institute and an annual Arts Business Challenge Award.
Accessing dollars, support
Making a living
Ms. Van Voorhis said artists face unique challenges compared to entrepreneurs in other sectors. “We don’t look to where there is a market gap, like ‘there’s no coffee shop in this area; I should start one,’” she said. “Our work is grounded in the message we want to send and figuring out how best to send it through our work.” Ms. Van Voorhis said that there are roughly 4,000 arts-related businesses in Cuyahoga County alone — representing nearly 5% of the county’s businesses — employing about 17,000. Cleveland Heights and Lakewood are the neighborhoods with the heaviest concentration of artists. Among the programs CPAC offers to aid artist-entrepreneurs is Creative Compass, an online tool that aggregates resources ranging from studio space and professional development to jobs and financing. “For artists, access to lending dollars is often an issue … (lenders) say, ‘You have uneven income and are kind of a scary prospect,’ ” says Ms. Van Voorhis. “They don’t understand the inflow and outflow of artists’ work.” She’s more enthusiastic than ever about the number of resources now available to local artistentrepreneurs and can rattle off a list: lending organizations like the artist-focused NoteWorthy Federal Credit Union; online “crowd-funding” resources for artists like Kickstarter.com and IndieGogo.com; support from community development corporations in arts-rich neighborhoods like Collinwood.
After graduating from Ohio State University with a fine arts degree in oil painting, Lea Wiertal realized quickly that painting couldn’t give her the kind of living she wanted. So instead she started a career in digital printing and didn’t touch a paintbrush for five years. “I was dying inside because I wasn’t making art,” Ms. Wiertal said. “I was looking for a way I could make money and still be creative.” By 2009, the printing business she owns with her husband was established enough that she could launch Lime Green Rhinestones, a line of handmade notecards and gift tags. Ms. Wiertal sells her work through Etsy.com and local art shows, and is currently working with Ms. Adamany to build a wholesale business. “People might have the money to spend on artwork, but they’ll never find you if you just stay in your studio painting,” she said. “You have to know how to run a business.” For Susan Kleinstub, a career in sales left her prepared to sell the line of mixed-metal personalized jewelry she launched a decade ago. But what she struggled with was developing a strategic vision behind her business and establishing the pricing that would take her there. “It’s figuring out how to price your work so you can actually make some money at this,” said Ms. Kleinstub, who markets her products as Susan K Jewelry. “It comes with confidence … when you see that people value your pieces and like what you do.” ■
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SMALL BUSINESS
There’s a way to make selling overseas less taxing
T
he recent extension of favorable dividends rates (as compared to ordinary income tax rates) means that U.S. businesses that export their products need to review the potential benefits available through the use of an Interest Charge-Domestic International Sales Corporation, referred to as an IC-DISC. More and more, smaller companies are seeing opportunities to sell their products abroad. When the dollar volume of such sales becomes significant, business owners should consider the federal tax savings opportunity available by establishing an IC-DISC. Despite the name, this tax savings technique is fairly straightforward. The IC-DISC is typically formed as a new, separate corporation with initial capitalization of at least $2,500. The corporation’s shareholders can be either individuals or other types of business entities. These shareholders make an election to treat the corporation as an IC-DISC. The IC-DISC is paid a commission by the existing business (the exporter). The exporter takes a deduction for the commission payment, reducing the ordinary business income of the exporter,
CARLGRASSI
TAX TIPS subject to the applicable rules described in part in this article. The IC-DISC itself is a tax-exempt entity. Tax is paid only by the IC-DISC shareholders when the commission payments are distributed from the IC-DISC to its shareholders as dividends. Currently, these dividends are taxed at a maximum 20% rate and are generally subject to the Unearned Income Medicare Contribution tax of 3.8%. This Unearned Income Medicare Contributions tax is new for 2013. For purposes of simplicity, we will assume that the maximum tax rate that applies in this instance is 23.8%. The tax savings therefore results from the fact that the commission arrangement between the IC-DISC and the exporter provides a deduction against ordinary income (which could be worth close to 40%) in exchange for the
tax cost of a dividend to the IC-DISC shareholders (taxed at a maximum rate of 23.8%), generating in some cases a net tax benefit of 16.2% on the allowable commissions paid. The amount of the commission that can be paid to the IC-DISC is limited to the greater of 4% of gross export sales or 50% of net income from export sales of the exporter. To give you a rough idea of the potential tax savings, a company with $10 million of gross export sales and $750,000 in net income from those sales could pay the IC-DISC a commission of $400,000 (4% of gross export sales), generating an annual net tax savings of $64,800 based on the rate assumptions set forth above. An example with more modest numbers would be an exporter with $1 million in export sales generating net income of $200,000. In this case, the manufacturer could pay a commission of $100,000 (50% of export profits), generating an annual tax savings of roughly $16,200. As one would expect, there are a significant number of requirements that must be met in order to have the IC-DISC qualify as such. For businesses exporting manufactured products, no more than
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50% of the manufactured goods themselves can be attributable to articles imported into the United States. In addition, the goods must be exported for direct use, consumption or disposition outside of the U.S. Although this tax benefit is generally thought of as an incentive for manufacturers, architectural and engineering services also qualify for work done on projects outside of the United States. Details on these and other requirements are provided in the Internal Revenue Code and regulations. There are very detailed rules on what constitutes qualifying exports and the amount of the commission, but this is not a tax shelter transaction or even a “pushing the envelope” tax strategy. The use of the IC-DISC as described above is specifically permitted under current law. There are a number of related planning opportunities associated with this technique. An IC-DISC can be used as a succession planning tool to accumulate cash on a tax-advantaged basis to facilitate a buyout of the exporter itself. Exporters also have used these entities to provide equity incentives to key management personnel without the drawbacks of
granting an equity interest in the exporter itself. If distribution of commission income is deferred, there is an interest charge imposed on the IC-DISC shareholders, based on the deferred tax liability of the shareholders and the base period Treasury Bill rate. As with any tax planning technique, the detailed requirements must be analyzed and applied to the exporter’s fact pattern to determine if a benefit can be derived. The description above is not a comprehensive recitation of these rules, but should serve as a guide to determine whether a closer examination is warranted. The exporter’s attorneys and accountants should be involved in this process. In addition, the exporter must be prepared to keep appropriate records to show that the exported goods meet the requirements discussed briefly above. The process of setting up an IC-DISC is relatively inexpensive, and this initial investment will in many cases produce substantial annual tax savings for the foreseeable future. ■ Carl Grassi is president of McDonald Hopkins LLC.
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16 CRAIN’S CLEVELAND BUSINESS
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APRIL 8 - 14, 2013
SMALL BUSINESS
Burton Carol grows by being cautious, caring Property management company believes in upgrading its units, focusing on workers By KIMBERLY BONVISSUTO clbfreelancer@crain.com
A
t a time when many multifamily property managers were shifting into conservative mode to ride out the economic downturn between 2007 and 2009, Burton Carol Management LLC was out shopping for properties. Joy Anzalone, executive vice president and chief operating officer of the Warrensville Heights property management company, said Burton Carol is disciplined in its approach to business and is a long-term holder of real estate. “In good times or bad, we’ve always got an eye toward the
future,� Ms. Anzalone said. “We’re looking to grow. We’re very disciplined in making sure we take care of our real estate.� David Davenport, senior vice president of Bellwether Enterprise Real Estate Capital in Cleveland, called Ms. Anzalone and Rob G. Risman, president and chief executive officer of Burton Carol, “salt of the earth� people who have expertise in every aspect of apartment management, from engineering to aesthetics to operations and financing. He said their business skills saw them through a rough economy. “Because they had been relatively conservative over the years and made prudent decisions and
did things right, they kept true to their core values,� Mr. Davenport said. Burton Carol was spun out of Consolidated Management in 2010, when the longstanding property management company split. Burton Carol — named after Mr. Risman’s parents, William Burton and Marion Carol Risman — became an apartment property manager, while BEK Developers LLC — headed by Consolidated Management co-founder Bob Risman — manages other commercial properties from its Beachwood headquarters. Today, Burton Carol owns and manages 22 multifamily apartment complexes in Ohio, Michigan and Florida, along with two office buildings. The company also oversees the Bilmar Beach Resort and Sloppy Joe’s restaurant
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Joy Anzalone, left, executive vice president and chief operating officer, and Rob G. Risman, president and chief executive officer, guide Burton Carol Management LLC, which spun out of Consolidated Management in 2010. in Florida. Ms. Anzalone said the company’s goal is to add two properties annually that fall within specific criteria — 200 units or more and located within a two-hour flight or drive from its established divisions in Warrensville Heights, south Michigan and St. Petersburg, Fla.
Growing intelligently At the same time, the company is renovating properties, upgrading units and adding amenities — like pools and clubhouses — in this positive lending environment. She said the outlook for multifamily properties is good, as occupancy in the last year and a half is better than it has been over the last 10 years. “We’re pretty cautious and conservative,� said president and CEO Rob G. Risman. “Although our company has been involved in all different classes of real estate — commercial, retail, office, industrial and hospitality — since starting Burton Carol in 2010, our focus has pretty much been on multi-family.� Mr. Risman said Burton Carol is not a portfolio buyer and that its focus is on growing intelligently. He said the company’s niche is buying, repositioning and creating value. “We don’t overleverage our properties at all,� he said. “We set aside much more than the average owners and managers for operations so that we can always take the best care of our assets. “We always put money back into our properties. We don’t spend wastefully. I learned a long time ago from my father to take care of your properties.� Ralph McGreevy, executive vice president of the Northeast Ohio Apartment Association, has worked alongside Ms. Anzalone, NOAA president, for several years. Mr. McGreevy said Burton Carol is passionate about housing and makes a point of going above and beyond for its residents. “They are a group of overachievers when it comes to customer satisfaction,� Mr. McGreevy said. “This is a 24-hour daily business. You need people sensitive to the needs of others and they are exemplary on that.�
Times are changing Burton Carol recently bought Arbor Court apartments in Mayfield Heights and is building a new 3,000-square-foot clubhouse that will serve as the leasing center, exercise room and common area for residents. Ms. Anzalone said the company also is doing a major renovation of common areas at the Parkside Towers Apartments in Strongsville. Mr. Risman and Ms. Anzalone said the economic downturn in recent years changed the face of today’s renter. More renters are middle-aged, making a lifestyle choice to rent and have the flexibility to use their money to travel and do things without the worry that comes with home ownership, including increasing real estate taxes and upkeep. And for their rent, Ms. Anzalone said, they have a staff that dotes on them 24 hours a day, along with amenities that only come with multimillion dollar homes: swimming pools, exercise rooms, tennis courts, clubhouses and fire pits. “A lot of people are beginning to believe that owning a home is not so much the American dream any more, and maybe they are better off putting their money elsewhere,� Mr. Risman said. “A lot of people are finding they don’t want to be tied to payments and responsibilities owning a home saddle them with. Even with historically low interest rates, we’re finding a lot of people are not being lured into buying a home.� Both Mr. Risman and Ms. Anzalone agree their employees set the company apart from other property management firms.
People power Ms. Anzalone started with the company as a housekeeper 31 years ago. Today, she helps manage about 200 employees. But her story is not unique. Virtually everyone in key positions within the company worked his or her way up from the bottom, with many employed for more than 15 years. “Our key to our success is our people, above all else. We have a tremendous amount of longevity,â€? Ms. Anzalone said. “Our employees are as special to us as the real estate.â€? â–
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CRAIN’S CLEVELAND BUSINESS 17
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SMALL BUSINESS
Companies should be in the market for sound investments
T
he still-tepid economic recovery and general uncertainty about U.S. economic policy means small business owners are keeping their business reserves under wraps. According to the most recent Gallup Small Business Index, approximately half of the small business owners surveyed are holding on to their hard-earned cash. They are delaying major capital expenses and are not making significant additions to staff. This wait-and-see approach takes place against a background of a bullish stock market. While they wait for more clear and consistent evidence that the economy is on the upswing, some small business owners might consider investing some of their business reserves to take advantage of current market conditions. But while the market beckons, would-be small business investors should keep in mind that the investment challenges they will encounter differ from those faced by personal or institutional investors. Generally speaking, small business investors differ from others in two ways. First, most successful small business owners have had success due to their own abilities. The acronym DIY could have been coined for small business owners. Small business owners also tend to have a higher tolerance for risk. But the same qualities that drive small business success aren’t necessarily the qualities that drive successful investment strategies.
LISAOLIVER
ADVISER Second, small business owners are accustomed to having most of their net worth tied up in their business. Having significant business reserves is more the exception than the rule; having significant business reserves when the market is bullish is an opportunity that small business owners should take under consideration. The first step toward capitalizing on business reserves is to develop a strategic, holistic investment plan that accommodates and separates personal and business investment goals. A holistic plan might integrate personal investment goals — saving for college or retirement or preserving wealth — and business goals such as business risk management, business continuity, exit strategies and succession planning. With those goals in mind, a small business investor can evaluate what amount of their net worth should be set aside for personal investment and what amount can be used and exposed to risk in their business investing. Evaluating available net worth means taking a close look at business funding and cash flow as well
as determining the business’ true value. The next step is determining investment style. Small business investors should have a good sense of their risk tolerance so that they select an investment style that mirrors their business approach. For example, for some small business owners, success might mean a single business venture with one or two locations. For others, success means building the next Apple. Determining investment style is particularly important for women business owners, most of whom operate small businesses. (According to the most recent U.S .Census data, small businesses represented 90% of women-owned businesses.) Recent research indicates that women’s influence over personal and business investment outstrips their sense of investment savvy. According to the 2012-2013 Prudential study “Financial Experience and Behaviors among Women,” fewer women than men feel very well equipped to make wise investment decisions.
Most small business investors might benefit by following two general guidelines: Have a widely diversified portfolio, and resist the urge to limit investment to their individual industry. This research has significant implications for women small business owners who might want to put business reserves to work in the market but lack confidence that they have requisite knowledge of investment strategies and tools, and so do not take full advantage of the opportunity. Determining investment style also means knowing how much time can be spared to manage investments. Small business owners are notorious for spreading themselves thin — it might make sense to work with a financial adviser rather than trying to juggle investment management along with other pressing business tasks.
Every small business investor’s needs and options differ depending on the business owner’s individual circumstances, including near- and long-term cash needs, debt levels and appetite for investment as a diversified revenue vehicle. That said, most small business investors might benefit by following two general guidelines: Have a widely diversified portfolio, and resist the urge to limit investment to their individual industry. There is no doubt small business owners would prefer to boost revenue as a result of more demand for their business services. But boosting revenue by using business reserves in a thoughtful investment strategy can also be a way to strengthen a small business bottom line and provide additional resources for use when there is clear opportunity to grow. ■ Lisa J. Oliver is president of KeyBank’s Greater Cleveland District and a leader in Key4Women, KeyBank’s signature program for women in business and in leadership.
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CRAIN’S CLEVELAND BUSINESS
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APRIL 8 - 14, 2013
MONEY MANAGERS
RANKED BY ASSETS UNDER MANAGEMENT LOCALLY(1) Total assets under local management with discretion (millions)
Company Address Rank Phone/Website
Dec. 31, 2012
Dec. 31, 2011
% change
Minimum Total number individual of local account accounts (thousands)
Portfolio analysts on staff
Compensation for services
Chief investment officer
Top local executive Title
1
Victory Capital Management Inc.(2) 4900 Tiedeman Road, 4th Floor, Brooklyn 44144-2302 (216) 898-2400/www.vcm.com
$12,937.2
$21,747.8
-40.5%
157
$10,000.0
62
Percentage of assets under management
2
Boyd Watterson Asset Management LLC 1801 E. Ninth St., Suite 1400, Cleveland 44114 (216) 771-3450/www.boydwatterson.com
$3,916.0
$3,897.0
0.5%
346
$250.0
NA
Fee only, percentage of assets under management
3
Wasmer, Schroeder & Co. 1111 Superior Ave., Suite 965, Cleveland 44114 (216) 622-0000/www.wasmerschroeder.com
$1,672.6
$1,433.9
16.6%
350
$1,000.0
4
4
Ancora Advisors LLC 2000 Auburn Drive, Suite 300, Cleveland 44122 (216) 825-4000/www.ancora.net
$1,534.8
$1,531.3
0.2%
601
$1,000.0
NA
5
Oak Associates Ltd. 3875 Embassy Pkwy., Akron 44333 (330) 668-1234/www.oakfunds.com
$855.7
$811.0
5.5%
50
$3,000.0
3
Percentage of assets under management
6
Spero-Smith Investment Advisers Inc. 3601 Green Road, Suite 102, Beachwood 44122 (216) 464-6266/www.sperosmith.com
$620.0
$504.5
22.9%
276
$250.0
7
Percentage of assets under management; fee only
Mimi Lord Robert C. Smith Jeffrey N. Malbasa
Robert C. Smith, president, CEO Jeffrey N. Malbasa, COO
7
Winslow Asset Management Inc. 3333 Richmond Road, Suite 180, Beachwood 44122 (216) 360-4700/www.winslowasset.com
$561.0
$466.0
20.4%
117
$1,000.0
4
Percentage of assets under management
Gerald W. Goldberg
Gerald W. Goldberg, chairman, CIO; Kara H. Lewis, president
8
Carnegie Investment Counsel 25550 Chagrin Boulevard, Suite 101, Beachwood 44122 (216) 367-4114/www.carnegie.me
$540.0
$453.0
19.2%
436
$500.0
8
Fee only
9
North Point Portfolio Managers Corp. 5910 Landerbrook Drive, Ste. 160, Mayfield Hts. 44124 (440) 720-1100/http://nppmcorp.com
$491.4
$439.1
11.9%
211
$500.0
3
Percentage of assets under management
Diane M. Stack
10
First Fiduciary Investment Counsel 6100 Oak Tree Blvd., Cleveland 44131 (216) 643-9100/www.firstfiduciary.com
$366.7
$311.0
17.9%
309
$250.0
3
Percentage of assets under management
Mary F. Anderson
Mary F. Anderson president
11
RAV Financial Services LLC 2000 Auburn Drive, Suite 400, Beachwood 44122 (216) 831-4900/www.ravfinancial.com
$323.5
$310.7
4.1%
385
$500.0
2
Fee only
David M. Taucher
Robert A. Valente CEO
12
Private Harbour Investment Management & Counsel 29525 Chagrin Blvd., Suite 110, Pepper Pike 44122 (216) 292-5700/http://privateharbour.com
$260.2
$241.0
8.0%
200
$500.0
3
Percentage of assets under management
James A. Blue
13
Van Cleef Asset Management Inc. 3201 Enterprise Parkway, Suite 140, Beachwood 44122 (216) 464-0253/www.vancleefinc.com
$243.3
$210.1
15.8%
NA
NA
5
Percentage of assets under management
Geoffrey C. Hauck Lino Sergo
Geoffrey C. Hauck Martin J. Burke Jr.
14
Jentner Wealth Management 3677 Embassy Parkway, Akron 44333 (330) 668-1000/www.jentner.com
$200.8
$177.5
13.1%
143
$500.0
2
Percentage of assets under management
Martin A. Weisberg
Bruce A. Jentner president
15
Reed Financial Services Inc. 3690 Orange Place, Suite 240, Beachwood 44122 (216) 464-2090/www.reed-financial.com
$149.8
$122.3
22.4%
250
$250.0
3
Percentage of assets under management
James M. Reed
James M. Reed president
16
Midwest Investment Management LLC 1301 E. Ninth St., Suite 1110, Cleveland 44114 (216) 830-1110/www.mimllc.com
$140.7
$119.9
17.3%
376
$500.0
NA
Fee only, percentage of assets
Norman F. Klopp
Norman F. Klopp managing partner
17
Winfield Associates Inc. 700 W. St. Clair Ave., Suite 404, Cleveland 44113 (216) 241-2575/www.winfieldinc.com
$118.5
$107.2
10.6%
168
$500.0
5
Fee only, percentage of assets under management
William W. Baker
NA
18
Cornerstone Wealth Management 835 Sharon Drive, Suite 280, Westlake 44145 (440) 899-4000/www.cornerstonewealthmgmt.com
$110.4
$93.0
18.7%
210
$0.0
230
Percentage of assets under management
Nick Dionisos
David A. Gomersall president
19
Broadleaf Partners LLC 9 Aurora St., Suite 5, Hudson 44236 (330) 650-0921/www.broadleafpartners.com
$94.3
$72.7
29.8%
285
$100.0
2
Percentage of assets under management
Doug MacKay
Doug MacKay CEO, CIO
20
Shaker Investments 3690 Orange Place, Suite 400, Cleveland 44122 (216) 292-2950/www.shakerinvest.com
$94.3
$92.5
1.9%
35
$200.0
4
Percentage of assets under management
Edward P. Hemmelgarn
NA
21
Sigma Investment Counselors 30195 Chagrin Blvd., Suite 210 N, Pepper Pike 44124 (888) 718-1132/www.sigmainvestments.com
$32.2
$26.5
21.2%
24
$1,000.0
1
Percentage of assets under management
Denise Margolis Farkas
Percentage of assets under management
Fee only
David C. Brown CEO
NA
Brian L. Gevry
Brian L. Gevry, CEO, CIO; Timothy M. Hyland, Michael E. Bee, managing directors
John S. Majoros III; Thomas Michael J. Schroeder N. Richmond Jr., principals, portfolio managers Denis J. Amato
Frederick D. DiSanto CEO
James D. Oelschlager, president, CIO; Mark James D. Oelschlager Oelschlager, Robert Stimpson, portfolio managers
Richard L. Alt Mark Bander
Source: Information is supplied by the companies unless footnoted. Crain's Cleveland Business does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues. Business lists and The Book of Lists are available to purchase at www.crainscleveland.com. (1) Companies on the Money Managers list are registered investment advisers with the Securities and Exchange Commission and have full discretionary control over where all of their clients' money is invested. This criteria is in keeping with the standard used by our sister publication, Pensions & Investments. (2) During 2012, Victory liquidated its three large cap value strategies and completed the transition of its money market accounts to KeyBank's Institutional Asset Services.
Gary P. Wagner Richard L. Alt principals Ronald J. Lang president, secretary
Geofrey J. Greenleaf CEO
Denise Margolis Farkas chief investment officer
RESEARCHED BY Deborah W. Hillyer
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19
Roll: ‘Risky’ visit from third-party quality auditor awaits Orlando continued from PAGE 3
“I’m everywhere,” said Mr. Storsin, who oversees a quality assurance staff of five and about 200 production employees each shift. The editor of bread must always be at the ready, even though Orlando churns out with near-perfection 250 varieties of handmade artisan breads, subs, hoagies, buns and dinner rolls for large retailers and food service outlets throughout the nation. “In the food business, you’re never off,” said Mr. Storsin, who joined Orlando just five months ago after gaining 17 years of quality assurance experience with two Canton-based poultry processors, Case Farms and Park Farms. “I’m always on call,” he said. “We chose it. We love it.” The product inspection work entails a grocery list of checks, from examining the bread’s appearance to ensuring there are the correct number of slices to a bag and verifying the product is dated correctly. Imperfections mean the bread either is processed into bread
crumbs or becomes a specially labeled “oops” product, which then is sold at Marc’s grocery stores. The goal is to minimize those outcomes because Orlando earns less money on the “downgraded” product, Mr. Storsin said. The unobjectionable rolls and buns pass through metal detectors before they enter the loading docks, where Mr. Storsin and his team accompany them for another round of visual checks. “If I sit in an office all day, that product may go out the door” without one last critical inspection, he said. “It keeps us on our toes.” So much so that Mr. Storsin, as part of a companywide health initiative, soon will sport a pedometer that will quantify his footsteps. “I imagine I’ll lose weight,” he said.
Check, and check again Mr. Storsin’s carousel of product inspection responsibilities isn’t limited to the assembly line. He also manages food safety specifications, addresses customer complaints and conducts weekly and
Clarion: Property will be first Indigo in state continued from PAGE 3
same location, by Interstate 271, and to tap two different hotel reservation and reward systems. “We’re going into the new millennium,” the younger Mr. Sahley said in an interview as he led a tour of what by June will become the Hotel Indigo. Not only are walls going down to the studs and carpet removed all the way to the concrete floors, but even the bathrooms are changing. In their place will be spa-like bathrooms with glass-walled, walk-in showers. Hardwood floors will go in the rooms, along with made-to-order furnishings. The current entrance to the lobby on the hotel’s western end will be replaced as part of the Hotel Indigo makeover with a new top, and a wood-paneled lobby that dates from 2002 will be removed to provide a wood-floored, bright, airy entrance. New architectural features also will give the building’s exterior a fresh look, Mr. Sahley said. A new lobby already is taking shape on the northeast end of the property that will provide the entrance to the soon-to-be 78-room Clarion, down from the current 200 rooms. Rooms in the Clarion are receiving a cosmetic makeover and are going into a wing of the hotel that has been closed for several years. “The layout of the hotel is perfect for this,” Mr. Sahley said, as the two hotels will be separate except for a single exit between them. The hotels will be divided by a Hyde Park Prime Steakhouse that went into the property when an Atlantic Hospitality affiliate bought the former full-service hotel in 2002.
Welcome to Ohio Manjusha Sharma, a spokeswoman for IHG, confirmed the Beachwood property will be the first Hotel Indigo to open in Ohio. The concept is undergoing a big expansion, with IHG expecting within the
next five years to more than double the number of Indigo properties to 100 from the current 45. No two hotels will be the same, she said, to provide a fresh consumer experience in each inn. One common denominator in the look of the hotels is the use of locally inspired murals that reflect the community. In Hotel Indigo Beachwood’s case, the subject will be the suburb that drew its first settlers in the early 19th century and now boasts a dynamic business environment that attracts 100,000 workers daily. Another developer is constructing a different boutique brand, an Aloft Hotel, on Richmond Road in Beachwood at the Chagrin Highlands corporate office park. The Hotel Indigo will add something new to the marketplace, and the Indigo and Aloft ventures will benefit from the strength of the hotel market in the eastern suburbs, said Vern Fuller, president of hotel management concern Marathon Associates and part-owner of the Staybridge Suites in Mayfield Heights. “The Hotel Indigo will fit in nicely,” Mr. Fuller said. “There is nothing like it in the marketplace, and it will appeal to the younger set.” The additional properties “will not even be a speed bump” for the hotel market out east, Mr. Fuller said. Business bookings are continuing to recover from the economic downturn, and the market stands to gain thousands of room nights with the opening of Eaton Corp.’s new Eaton Center corporate campus in Beachwood. Although part of the Clarion has remained in operation as preparatory work began over the last six months, the hotel will close in midApril and reopen in June. The Indigo is expected to open by the end of 2013. Mr. Sahley declined to say how much Atlantic Hospitality is spending on the project. ■
“I’m always on call. We chose it. We love it.” – Paul Storsin, quality assurance manager, Orlando Baking Co., on the food business monthly system audits. “We do a team audit every Wednesday, with me, John Anthony (Orlando), a QA (quality assurance) tech, a representative from maintenance, a plant manager and someone from sanitation,” Mr. Storsin said. The weekly audit essentially places each process under a microscope. The monthly audit entails similar procedures. The relentless scrutiny means the baked goods manufacturer is able to head off customer complaints, keeping to around 5% or less the percentage of both internal and external critiques about the product. “But if a customer were to complain that our bread was stale, we’d ask for the label and product back and do shelf life testing, micro-testing, a visual check for anything unusual,” Mr. Storsin said. “They
come up negative all the time, but it’s part of the process.”
Orlando said. “He’s been a great asset to the company.”
Satisfying the giant
‘Risky’ move ahead?
Mr. Storsin last December assumed the quality assurance manager job to help Orlando transition to a new facility and quality system audit required by one of its latest big-box customers, Wal-Mart Stores Inc. The retail giant requires its suppliers to be certified according to global food safety standards. “It’s hard,” Mr. Storsin said. “Wal-Mart gets very detailed with paperwork, tracking and logging. There’s going to be a system for a system for a system.” John Anthony Orlando, vice president of operations for the 365employee company, said Mr. Storsin’s familiarity with this particular auditing process and his tenure with Case Farms and Park Farms, which Case acquired last year, made him an ideal fit for the job. “He has the credentials and experience we were looking for to elevate QA to the next level,” Mr.
Mr. Orlando’s vision is to request an unannounced visit from the company’s third-party quality auditor — a move he qualifies as “risky” among food manufacturers and one that never has been initiated by the 141-year-old family baking company. “It makes you better,” Mr. Orlando said. “If you’re ready for an unannounced audit, you’re ready for anything.” For now, the quality assurance team under Mr. Storsin’s direction is mobilizing for the next annual three-day quality audit in May, which he hopes nets fewer than four “minors,” or dings, on the audit report. “A minor could be whiteout on paperwork or a leak in the roof,” he said. Last year’s audit yielded six minors and an “A” grade. “You can get an A plus, but I don’t know anyone in the nation who has,” Mr. Storsin said. ■
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APRIL 8 - 14, 2013
Tradition: Sheoga is expanding with 65,000-square-foot plant continued from PAGE 1
More than 30 years later, Mr. Miller’s wood floors are sold around the world, and Sheoga Hardwood Flooring & Paneling Inc. is looking to add more employees, more equipment and a new product line to its operation in Geauga County. The company is running out of space in its 48,000-square-foot plant, with fragrantly scented wood stacked to the ceiling. The maker of Sheoga-brand wood floors bought nine acres adjacent to its current home at 15320 Burton-Windsor Road and hired Mullett Co. in Newbury to build another 65,000square-foot plant on it. Mr. Miller expects ground to be broken this spring, and the whole plant could be built in six to eight months. That expansion will drive the need for more employees. Right now, Sheoga has about 55 employees, but Mr. Miller said he’d like to hire another 15 to 20 people once everything is up and running. He already has hired three employees to get their training started, and he’s been getting lots of calls from people looking for work. Kathy McClure, president of the Middlefield Chamber of Commerce, isn’t surprised, and said the company’s attention to quality has helped put it — and the community — on the map globally. “The wood industry is so very significant to our local economy,” Ms. McClure said. One of the qualities on which Middlefield prides itself is being a region that integrates agriculture and industry, Ms. McClure said, and Sheoga encompasses both. Ms. McClure said while the community suffered during the recession, companies are starting to see improvements. Sheoga managed to survive the recent recession without layoffs, choosing instead to cut some work weeks short. And an expansion of the company’s foreign market into places such as Canada and Singapore helped the Sheoga brand weather the recession when the U.S. housing market stalled, Mr. Miller said.
JANET CENTURY PHOTOS
BELOW: Workers at Sheoga Hardwood Flooring & Paneling feed lumber into a moulder, which is used to shape the flooring. ABOVE: The back side of the moulder is shown. The foam-enclosed hut absorbs the sound the cutting knives emit.
“People are becoming more and more green-minded, and what’s greener than wood?” – Pete Miller, president, Sheoga Hardwood Flooring & Paneling Inc. our rural community,” McClure said.
Changing with the market
Busy Mr. Miller It hasn’t always been easy. At first, Mr. Miller and the other shareholders leased floor space and equipment to get the company off the ground. They even hired temporary employees, and Mr. Miller, who still was working at a sawmill down the road, would take work home with him. His employer, Stephen M. Trudick, didn’t mind. Mr. Trudick is a shareholder in Sheoga and the person who suggested that Mr. Miller start a flooring company. When he started at Mr. Trudick’s Hardwood Lumber Co. in Burton at age 14, Mr. Miller would leave work and head home to milk cows and haul hay on his family farm. “So I knew what work was all about going into it,” Mr. Miller said of starting the flooring business. By 1994, the owners had invested in real estate and built a plant housing dry kilns and waste-wood boilers. Today, Mr. Miller still is the company’s president, but he sold his shares to the other shareholders in the ’90s. Mr. Miller said his Amish traditions, like the one eschewing electricity, were restricting the
Ms.
growth of the company. Mr. Trudick, who is not Amish, is the majority shareholder; there are five other shareholders, who are Amish but who are not active owners. The company now has moved toward more modern technology and automated processes. Mr. Miller even uses email at the office to communicate with customers on the West Coast and overseas, and the company has a Twitter account.
Weekday wedding? OK Sheoga has made adjustments for its Amish employees, who make up about 70% of the work force, by accommodating traditions such as weekday weddings. Mr. Miller said he sees benefits to hiring within the
Amish community, noting that employees are used to hard work and long days. Mr. Miller is quick to emphasize that all the company’s employees — Amish and not — are considered valuable members of the team. Sheoga vice president Barbara Titus said in an email that employees have a range of experience, from 15-year-olds who have just graduated eighth grade to longtime employees who have been with the company since the start. Everyone has someone in the company with whom they can relate. Mr. Miller said retaining employees has been critical to the company’s success. To foster that team mentality, Mr. Miller said, he used to take employees out on fishing
trips. Now that the company is larger, they hold family picnics every July, Ms. Titus said. The company also is committed to sustainability, selling Amish families scrap wood to heat water and sawdust to use for animal bedding. Wood is air-dried for months before going into the kiln, saving on fuel, and Sheoga burns sawdust to run its boilers and heat the building. “People are becoming more and more green-minded, and what’s greener than wood?” Mr. Miller said. Sheoga has been a good neighbor, one with a focus on being environmentally friendly, said Ms. McClure of the chamber of commerce. “They care enormously about
Sheoga does adapt to current flooring trends. Some of the space in the old plant will be used to start an engineered flooring line, which has been in demand, Mr. Miller said. The flooring, which is made up of a quarter-inch of wood over a half-inch of plywood, can be used on higher moisture surfaces, such as concrete, that typically don’t support hardwood floors. At present, the company offers ¾-inch thick hardwood floors, paneling and accessories, selling about 2.5 million to 3 million square feet of flooring each year. Another trend the company embraced in recent years was the demand for textured flooring, or flooring that has been handscraped to look old and worn. After about two years of experimenting, employees fashioned a machine that was able to scrape the wood faster and without repetition, Mr. Miller said. The company recently sold the patent rights for the textured flooring machine to an equipment manufacturing company, choosing to concentrate on what it has done best for the past three decades — making floors. “Our focus is just to continue serving our customers,” Mr. Miller said, “and we’re always excited about developing new customers and serving those customers.” ■
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21
Powerful: Charles and David Koch are both worth $34 billion continued from PAGE 1
Koch (pronounced coke) AG Investment LLC — a subsidiary of Koch Industries, the second-largest privately held company in the country with more than $100 billion in annual revenue — is infusing $240 million into American Greetings through a preferred stock investment. Koch owns a diverse group of companies involved in oil refining and chemicals, fibers and polymers, and cattle ranching, to name a few sectors. Led by brothers Charles and David Koch, the company and its investments have been growing like weeds. During a period when many companies were contracting, it doubled its revenue and increased employment fivefold from 2000 to 2011, according to a story last September in The Wichita Eagle. Koch’s growth has been aided by acquisitions such as its $21 billion deal in 2005 for pulp and paper company Georgia-Pacific Corp. Koch subsidiaries also often take positions in other companies. Last December, Koch bought a 45% stake in Guardian Industries Inc., a Michigan-based architectural and automotive glass supplier, becoming its largest single shareholder. Now there’s this investment that will add greeting cards to the mix as they participate in the Weiss family’s effort to take the company private in a deal with a total value of $878 million. According to Forbes, Charles and David Koch tie as the world’s sixthrichest person with matching net worth figures of $34 billion. Yet, at least back in 2004, they still showed up for work, a former executive of theirs said. “If you have that kind of wealth, you’re not going in every day because you need money,” said Lloyd Boyd, who last worked for Koch in 2004 as the chief information officer for one of its subsidiaries. “They bring such passion and heartfelt commitment to the business,” Mr. Boyd said. The Kochs believe ownership has tremendous value, and that people who own something are more apt to bring value to it, said Mr. Boyd, now chief information officer of Friedkin Services Group, a Houston
A sampling of Charles Koch’s beliefs Unlike most corporate CEOs who shun speaking their minds publicly for fear of alienating investors and customers, Koch Industries chairman and CEO Charles G. Koch gives abundant and unvarnished expression to his thoughts about business and government on his company’s website under a tab called “Perspectives.” Here is sampling of Mr. Koch’s thoughts: excerpts from a July 1, 2012, entry titled, “Perspectives on economic freedom.” “Citizens who over-rely on their government to do everything not only become dependent on their government, they end up having to do whatever the government demands. In the meantime, their initiative and self-respect are company owned by a wealthy family that he says operates similarly to Koch Industries. The Kochs also believe in limited government and in a philosophy called Market-Based Management, both of which have attracted a fair amount of attention over the years.
Free enterprise guys A management philosophy and practice developed by Charles Koch and described at length in his book, “The Science of Success,” Market-Based Management applies to managing a large organization with the same principles that make market economies work, explained Malcolm C. Harris Sr., a finance professor and economist at Friends University in Wichita. The Koch brothers are outspoken Libertarians who believe in free market enterprise, said Mr. Boyd, who departed amicably after eight years with the company and for some time worked directly with David Koch, who was the 1980 Libertarian candidate for vice president. The core of the Koch philosophy is that an organization’s role is to create value in society. The Kochs believe centrally controlled organizations do not work well, and they see to it that decision-making oc-
destroyed. “It was President Franklin Roosevelt who said: ‘Continued dependence on Charles G. Koch (government support) induces a spiritual and moral disintegration fundamentally destructive to the national fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.’ ” “Businesses can become dependents, too. If your struggling car company wants a government bailout, you’ll probably have to build the government’s car — even if it’s a car very few people want to buy.” curs at the lowest possible level, Mr. Boyd said. “You’re empowered to make decisions,” he said. The Kochs’ beliefs have been met with a fair amount of criticism on both sides of the political aisle, Mr. Boyd said. “There’s a lot of turmoil around Koch and the Koch brothers,” he said. There have been accusations that the Kochs have secret meetings with other billionaires to collude and coerce any given administration to do what they want, Mr. Boyd said, and doubt has been expressed that their kind of wealth could be amassed through honest means. “Most of that stuff is complete garbage,” Mr. Boyd said. “He (Charles) believes in winning by pure competition,” he said. “If you’ve got a better product or service, you should succeed. If you don’t, you will fail and you should fail.”
Mind if I join you? The Koch brothers, he noted, do support organizations that promote their beliefs, such as the Cato Institute, which Charles Koch helped form. Its website describes Cato as dedicated to the principles
of individual liberty, limited government, free markets and peace. For all the family’s wealth, Mr. Boyd was struck by Charles Koch’s humility. He would eat lunch in the company cafeteria but didn’t just sit down; he would ask first, “Do you mind if I sit down?” “It struck me, obviously to this day, because I thought, you own the place,” Mr. Boyd said. “What am I going to do — say no?” Both brothers, he said, are extremely bright. “I’ve never seen two people who can absorb information so fast and internalize it and fire out questions that are very detailed,” Mr. Boyd said. “It’s extremely impressive how intelligent they are.”
Builders, not shredders Both American Greetings and Koch Industries declined comment for this story. However, an April 1 Wichita Eagle story quoted Koch Industries’ chief financial officer as saying Koch subsidiaries often make investments in companies they don’t plan to operate if they have confidence in the management and the long-term future of the business. “It’s not dying,” the newspaper quoted Steve Feilmeier as saying about the greeting card business. “Its revenues are flat to slightly growing. ... Send your wife a text for her birthday and see how that works out for you. Cards still matter.” The Koch brothers are very cautious investors, noted Dr. Harris from Friends University. “They do their homework with a very sharp pencil,” he said. “They would treat a $240 million investment as if it were money coming out of Charles or David Koch’s pocket, so they would be rather tough with the scrutiny.” And the Kochs don’t invest to tear a company apart, said Tim Witsman, president of the Wichita Independent Business Association, of which Koch Industries is a very active member. “They’re not people who go in and buy up companies to just shred them,” Mr. Witsman said. “They are builders and operators, so that means they see, between the market and what can be done with that
company, good value.”
Vote of confidence in AG The American Greetings transaction is a bit unusual for the Kochs in that they tend to invest and take some control over a company, Dr. Harris said. In this case, Koch will buy between 220,000 and 260,000 nonvoting preferred shares in American Greetings at a price of $980 apiece. “Since this is a passive investment, I think it’s a vote of confidence in the management and the family’s running of the business,” Dr. Harris said. Koch also tends to be involved in business-to-business companies, not business-to-consumer, though its 2005 purchase of Georgia-Pacific — the company behind ubiquitous brands such as Brawny paper towels and Quilted Northern and Angel Soft toilet paper — added more retail to its portfolio. For about a quarter-billion dollars — their investment in American Greetings — the Kochs “get in to see how the (greeting card) business works” and simultaneously may learn ways to improve the base product Georgia-Pacific makes, said Mr. Boyd, the former employee. The Kochs also will gain knowledge that could pave the way for additional investment in American Greetings, he said. As for the Weisses, they secure the capital they need now, probably will have access to more capital as a result of their relationship with Koch, and also gain credibility with a partner the size of Koch, said Ron Ryan, an associate professor of management and entrepreneurship at Newman University in Wichita. Given the nonvoting nature of the stock Koch is buying, it’s likely the American Greetings investment is a purely financial deal with a pretty good return for Koch, Dr. Ryan said. However, it also may reflect a bit of long-range planning. “What do you think will happen with oil and gas 30 years from now?” Dr. Ryan said, referring to Koch’s significant investments in the energy business. “We may not need oil and gas. It’s a good way for them (Koch) to diversify.” ■
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CRAIN’S CLEVELAND BUSINESS
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APRIL 8 - 14, 2013
THEINSIDER
THEWEEK
REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS
APRIL 1 - 7
Lake view? You better believe it
The big story: The Weiss family made official
Eaton Corp. may have traded its headquarters in the skyscraper at 1111 Superior Ave. in Cleveland for a new corporate campus in Beachwood, but it has retained a prized amenity of downtown office towers. Thanks to a location at the second-highest elevation in Cuyahoga County and a 10-story central building, Eaton’s top floor overlooks much of the region and still has a view of Lake Erie, as a blue band spanning the northern horizon attests. — Stan Bullard
that it will acquire American Greetings Corp. A newly organized entity owned by the Weiss family will pay American Greetings Class A and Class B shareholders, excluding the Weiss family and related entities, $18.20 a share in cash, and, if declared by the board of directors, one regular quarterly dividend of 15 cents a share. The deal is valued at $878 million. If the transaction closes this July, the targeted closing month, the total cash value shareholders would receive would be $18.35 a share. See related story, Page One.
Try to see it my way: The headbutting continues between Timken Co. and two large shareholders that want the company to split its steel and bearings operations into two businesses. Following an April 2 meeting with Timken’s board at the company’s Canton headquarters, Relational Investors LLC and the California State Teachers’ Retirement System, which together own 7.28% of Timken’s common stock, said they “called into question the ability of the family-influenced board of directors to act in the best interest of all of the company’s shareholders.” Timken, though, launched a website, www.TimkenDrivesValue.com, that contains information for shareholders regarding its board’s recommendation to vote against the proposal. New to the neighborhood: Developers of Ernst & Young Tower in the Flats East Bank Neighborhood announced that Wells Fargo in Cleveland and Gilbane Building Co., the contractor for the tower, agreed to lease a total of 30,000 square feet in the building. Taking over the entire third floor of the tower will be 81 workers from Wells Fargo Advisors LLC, Wells Fargo Commercial Banking and Wells Fargo Commercial Real Estate. Gilbane said it will move its Cleveland office to the 14th floor of Ernst & Young Tower.
Older mouths can rejoice Experts say the surge of baby boomers has spurred a need for more experts in geriatric dentistry, and Case Western Reserve University’s School of Dental Medicine appears to be embracing the opportunity. Case Western Reserve brought in Marco Rouman, one of the few experts in the field, last fall to give its geriatric dentistry program a facelift. Mr. Rouman, who was born in Egypt and directed a similar program at the University of Iowa, said the program will combine dental, medical and pharmacology education because of the many medications prescribed to older patients. “Ten years ago, someone could graduate from dental school and ignore elderly patients,” Mr. Rouman said in a universityissued newsletter. “Graying baby boomers now make that impossible. Their numbers
MILESTONE
STAN BULLARD
The new Eaton Center in Beachwood have driven the need for this special care.” The newly designed program will involve developing inter-professional teams of dentists, doctors and nurses who are well versed in the intersections of oral and physical health. Students also will make “house calls” to nursing homes to treat those elder patients who otherwise couldn’t make it to the dentist. “At Case Western Reserve, we are performing a facelift to geriatric dentistry by redefining the scope of this program to include complex full-mouth reconstructions and maxillofacial rehabilitation,” he said in the newsletter. “Our model will be copied nationwide.” — Timothy Magaw
Potbelly consumes another location Potbelly Sandwich Shop, a Chicago-based chain that opened its first outlet here last year in downtown Cleveland, said it will open its third shop in the region April 9 in Independence.
Excerpts from recent blog entries on CrainsCleveland.com.
Piece offering:
Ferro Corp. sold another piece of itself. The maker of specialty chemicals completed the sale of its pharmaceuticals business, Pfanstiehl Laboratories in Waukegan, Ill., to PLI Holdings Inc., an affiliate of private equity firm Med Opportunity Partners LLC of Greenwich, Conn. The buyer is paying $16.9 million in cash and an earn-out incentive payment of up to $8 million. Ferro said it retained certain tax benefits with an estimated value of approximately $5 million. Ferro’s pharmaceuticals business generated segment income of $2.4 million in 2012.
Down to the core: The major assets of defunct custom injection molder Core Systems LLC were purchased by plant and machinery liquidator Perfection Industrial Sales of Elk Grove, Ill. Cleveland lawyer Thomas Coffey of Tucker Ellis represented the secured creditor in the auction, which was held April 2. Mr. Coffey said Perfection paid $4.33 million for the equipment in Core System’s Painesville plant and $1.8 million for the Mount Gilead, Ohio, plant and equipment.
In the mix for growth
COMPANY: Turfscape Inc., Bath Township OCCASION: Its 25th anniversary The full-service provider of lawn maintenance and snow removal services traces its roots to 1988, when George Hohman started a company called Western Reserve Lawn Maintenance. He ran that business out of his parents’ garage and had two employees. A quartercentury later, Turfscape has more than 100 employees during the busy summer months and continues to grow. Turfscape focuses on serving condominium and homeowner associations, as well as commercial and health care facilities. Yearround services begin with growing-season grounds maintenance and extend into snow and ice removal. Turfscape also provides supplemental landscaping services to customers that require additional property upgrades. This month, Turfscape will move into new headquarters in Bath Township. It will continue to maintain a branch in Twinsburg, where it has been headquartered, as well as in Hinckley and North Canton. For information, visit: www.turfscapeohio.com.
Send information about significant corporate anniversaries to managing editor Scott Suttell at ssuttell@crain.com.
If you can’t retread ’em, then recycle ’em NASCAR — a green operation? It’s no joke. The racing giant has been working to make the sport more environmentally friendly in recent years, and a local company plays a key role. Akron-based tire manufacturer Goodyear recycles used tires after every race, according to information from NASCAR. That adds up to more than 120,000 used tires each year just from NASCAR’s top three national series. Goodyear is NASCAR’s official tire supplier. The tires go on to have a second life in a variety of uses ranging from power generation to asphalt production. NASCAR is highlighting its “green” initiatives this month in light of Earth Day and Arbor Day. Goodyear is not part of the company’s special initiatives in April, which will encourage fans to donate toward the planting of trees, but it is part of NASCAR’s overall move toward sustainability. — Rachel Abbey McCafferty
BEST OF THE BLOGS
Design inspiration:
Kent State University named the winning team for designing the new, $40 million home planned for the school’s College of Architecture and Environmental Design. After holding a competition that drew the interest of internationally recognized architects, the university chose the team of Weiss/Manfredi of New York as lead designer and Richard L. Bowen & Associates of Cleveland as architect of record. The College of Architecture and Environmental Design currently is housed in three separate structures. The new, 120,000-square-foot building will unite the college under one roof.
The sandwich chain, known for live music during dining hours, said it named Patrick Sullivan, previously general manager of its Mayfield Heights location, as general manager of the new store. Mr. Sullivan said the Independence location attracted the company because of its large population of office workers during the work day in addition to a surrounding residential area. The Independence store will employ 20 at 6901 Rockside Road. It joins a chain of 260 shops in 17 states. — Stan Bullard
■ High-end blender maker Vitamix Corp. in Olmsted Township was part of a Wall Street Journal story that declared America’s businesses “stepped up investment in the first quarter, as the threat of the year-end fiscal cliff was averted.” The Journal noted that “one closely watched gauge of business investment — new orders for nondefense capital goods, excluding aircraft — fell slightly in February after climbing in January. … But the longerterm picture is of businesses steadily increasing spending after a big pullback in the middle of last year. The gauge’s threemonth moving average has risen every month since October.” Vitamix, the newspaper said, is “in the middle of a $10 million project that will add 51,000 square feet to its headquarters.” The company is benefiting from a trend of “whole-food juicing,” as well as consumers’ taste for smoothies, Anthony Ciepiel, Vitamix’s chief operating officer, told The Journal. Vitamix has about 700 employees and expects to make more than 200 new hires in 2013, Mr. Ciepiel said. He told The Journal that February’s sales were up 82% from sales in February 2012.
Have catchphrase, will travel ■ USA Today totally is enthralled with Cleveland Cavaliers TV announcer Austin Carr. The paper named him to its list of “10 announcers who should never retire,” which was inspired by Tim McCarver’s decision to step away from baseball broadcasting after this season.
USA Today identified “Get that weak stuff outta here!” as Mr. Carr’s main catchphrase — for what it’s worth, we have a preference for “Throws the hammer down!” — and noted, “Even when Kyrie Irving is not on the Carr court, the Cleveland Cavaliers are a must-watch on (NBA) League Pass just because of this guy.”
A tax cut? They’d drink to that ■ The nation’s craft brewers have a loyal and growing customer base, and they hope to leverage that into something quite helpful: a tax cut from Congress. The New York Times reported that the brewers visited Washington, D.C., in late March for their industry’s first big conference in the nation’s capital. In part, they were advocating for The Small BREW Act, which would reduce the tax on small brewers’ first 60,000 barrels to $3.50 from the current $7. For every barrel beyond 60,000 but before 2 million, the tax would be $16, down from the current $18. After two million, breweries would pay the full $18 tax. As craft brewers grow in popularity and brew more beer, their tax burden is rising sharply. Patrick Conway, co-owner of Great Lakes Brewing Co. in Cleveland, told The Times, “We are the victims of our own success.” The Times reported that Mr. Conway “brought a delegation of 12 employees to Washington to network and publicize his brews with tap takeovers at local bars.” Mr. Conway added, “We’re always being courted by distributors. It’s not our intention to sell in every state, but we are flattered.”
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THE TRADITION CONTINUES FRIDAY, MAY 10, 2013 5:30–7:30 P.M. Radiance, a business casual, cocktail / hors d’oeuvres reception with a short program, is Cleveland State University's signature event in support of student scholarships.
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