ryan mcgowan cleveland business report
TRANSCRIPT
Welcome to Cleveland
The Pittsburgh of the Midwest
Prepared for
Josh Knauer, CEO and President of Rhiza, Inc.
Prepared by
Ryan P. McGowan
John Carroll University
October 26, 2016
October 26, 2016
To: Mr. Josh Knauer, CEO and President of Rhiza, Inc.
From: Ryan McGowan
Subject: Unique Opportunity for Rhiza, Inc.
I recently researched and analyzed the opportunities for businesses like yours in Cleveland. In the following report, I present findings and statistics to support that Cleveland will continue growing similar to how Pittsburgh has. You are receiving this report because I believe you will agree with the conclusion that Rhiza, Inc. should look to the downtown Cleveland region to expand into a new market and continue growing. Cleveland, much like the Steel City, has recovered from the manufacturing bust by turning to intellectual workers and adding thousands of jobs in knowledge-based sectors. Now, the city has a high proportion of workers with an advanced degree that ranks as top-ten in the nation. These workers live in an inexpensive area, so they demand less wages. Businesses also see this affordability, too; companies in Cleveland pay on average over ten percent less in operating costs than in comparably-sized metropolitan areas. I am interested in Rhiza, Inc. because I am from Pittsburgh. I first heard of the company from seeing top startup lists compiled by media outlets at home and loved the business model. Currently, I study finance and computer science at Cleveland’s John Carroll University, and I view Rhiza, Inc. as a distinctive company blending my interests. Also, both my parents run their own small businesses, so I have a special passion for companies like yours. I have found success and am proud to call Cleveland my second home, and I believe Rhiza, Inc. will do the same. Please call me at (412) 527-5800 or email me at [email protected] when you have finished the report. I am looking forward to your feedback.
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Table of Contents Executive Summary ...................................................................................................................... ii
Work Plan ..................................................................................................................................... iii
Welcome to Cleveland .................................................................................................................. 1
Conclusion ..................................................................................................................................... 1
Recommendation ........................................................................................................................... 2
Talent Pool Size and Quality ........................................................................................................ 2
The Advantages of Operating a Business in Cleveland ............................................................. 4
A Strengthening Economy ........................................................................................................... 5
Cleveland’s Growing Civic Pride and Livability ....................................................................... 7
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Executive Summary
The purpose of this report is to analyze the business opportunities that Cleveland, Ohio,
offers Rhiza, Inc. in comparison to other cities. The criteria by which Cleveland is evaluated are
the size and quality of the talent pool, followed by the advantages of operating a business in the
city, the strength of the local economy, and the community pride. The talent pool and business
advantages are the most important.
Cleveland is a Smart, Affordable City
Much like Pittsburgh, Cleveland relies on its quality colleges and universities to create
and fill jobs with skilled workers. Over 20 years, the number of employees with advanced
degrees rose by 6 percent to 17.1 percent in 2013; this is actually higher than the 15.5 percent in
Pittsburgh. Meanwhile, Cleveland is an affordable city for new businesses. The index rating for
the cost of doing business in Cleveland is significantly lower than the national average, including
Pittsburgh’s. This rating takes into account average wage, average operating expenses, tax rates,
and other economic indicators. Cleveland’s index rating is only 84.2, which means the cost of
doing business is almost 16 percent lower than in the average city in the country.
Cleveland Offers Rhiza, Inc. a Chance to Grow Exponentially
The report recommends Rhiza, Inc. immediately begins looking for office space and
employees in downtown Cleveland. The city’s growth is attracting established businesses to
Cleveland, so it is important to act now before other companies move in and decrease the
potential market share and profits Rhiza, Inc. could claim.
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Work Plan
Opportunity Statement
Cleveland, Ohio’s business climate has grown increasingly more favorable in recent
years. Now, due to the university-educated talent pool’s strength and size, the advantages of
conducting business in the city, the readily-available funding, and the overall growth of the city
(especially with Millennials), expansion to Cleveland has potential to be a boon for many
emerging businesses.
Purpose Statement
The purpose of this report is to analyze the business opportunities Cleveland offers and
whether Rhiza, Inc. will benefit from expanding with a new operations center in the city.
Successful seizure of this opportunity would help the company grow to command a larger share
of the domestic and global market for data analytics by securing a place in this favorable
business location before their competitors.
Research Strategy
This report will be based on several authoritative sources, including studies such as “The
‘Upskilling’ of Cleveland's Workforce" and “From Metal to Minds: Economic Restructuring in
the Rust Belt” by the Maxine Goodman Levin College of Urban Affairs Center for Population
Dynamics. Additional information comes from Cleveland-based organizations such as Team
NEO, the Greater Cleveland Partnership, and the Business Advisers of Cleveland. Also,
information from databases such as EconLit is included for secondary source material.
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Scope and Ranking
The scope of this report will be limited to four main criteria. They are the size and quality
of the talent pool, the advantages of doing business in the city, the strength of the local economy,
and the community pride.
Limitations
With only six weeks to complete the project, a lack of research budget, and a narrow list
of criteria, the report’s reliability has limitations. However, Rhiza, Inc. should still rely on this
analysis to glean factors to explore further while considering Cleveland for a new operations
center.
Assumptions
The report assumes Rhiza, Inc. is able to operate in another state and has not already
selected an expansion location. It also assumes I will graduate with a finance degree in time to
become the Chief Financial Officer of the new Cleveland office when it opens.
Tentative Outline
The report is organized according to the criteria listed above using the direct approach.
Time Line
• Begin research: September 20, 2016
• Complete first draft: October 15, 2016
• Complete Executive Summary: October 17, 2016
• Submit draft for peer review: October 19, 2016
• Submit final report: October 26, 2016
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Welcome to Cleveland
The purpose of this report is to analyze the business opportunities Cleveland offers and
whether Rhiza, Inc. will benefit from expanding with a new operations center in the city.
If this report’s recommendation is followed, Rhiza, Inc. could find an increased customer
base and market share. Successful seizure of this opportunity to expand into the Midwest would
help the company grow to command a larger share of the domestic and global market for data
analytics by securing a place in this favorable business location before their competitors.
The report follows the direct format and is organized by criteria. It begins with the size
and quality of the talent pool, followed by the advantages of doing business in the city, the
strength of the local economy, and finally the community pride.
Each section of this report will present data that applies the criteria to Rhiza, Inc. This
data is then analyzed and presented along with a conclusion regarding how the criteria presents
an opportunity for the company to expand to Cleveland.
Conclusion
Cleveland is a growing city on the rise with many major metrics supporting the potential
for new businesses. For example, the amount of well-educated, affordable workers has reached
an all-time high thanks to the numerous quality colleges and secondary institutions close to
Cleveland. The strengthening economy also means companies stand to experience real long-term
benefits and makes a move to Cleveland prudent. Furthermore, businesses in Cleveland would
have little problem attracting young employees to the city because of the improving livability.
Because of all these benefits, the report finds that a new office in Cleveland stands an
excellence chance of succeeding and helping Rhiza, Inc. achieve profitability and gain unbridled
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access to new markets. Rhiza, Inc. should confidently expand into the Northeastern Ohio hub
because the region is prepared to sustain growing companies.
Recommendation
Rhiza, Inc. should begin the search for an office space in downtown Cleveland, and it
should start the hiring process to staff the new office with the necessary personnel.
It is also recommended that Rhiza, Inc. hires Ryan McGowan to be the Chief Financial
Officer overseeing the Cleveland operations center. He would manage general and
administration expenses and long-term planning of the new office. He should run the expansion
because of his education in finance and computer science at John Carroll University.
Do not discount him because of his age. Although he is young, Ryan possesses the
necessary business and computer science experience to successfully lead a team in the office due
to his past internship experience at Crown Castle Communications.
Finally, Ryan’s passion for this position is unmatched. He has had aspirations to work for
Rhiza, Inc. since he researched them after learning they were ranked the top startup in Pittsburgh.
Talent Pool Size and Quality
By talent pool, the report means the number of available employees in the Cleveland area
who possess high skilled knowledge. The focus of this criterion is to examine how the workforce
is growing in number and quality in relation to the skills needed by Rhiza, Inc., especially in
software and technology knowledge.
Several studies indicate that Cleveland’s high-skilled job creation is thriving. This finding
helps contradict the negative trend the overall jobs report displayed between 2000 and 2010 that
can seem foreboding for incoming businesses at first glance. The city’s total job market
experienced an aggregate loss of over 80,000 jobs since 2000 ("The ‘Upskilling’ of Cleveland's
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Workforce" 1). This should not be a deterrent because it can be attributed to the Rust Belt’s
decline in manufacturing. More positively, the education and health services sectors alone added
over 50,000 jobs to Cleveland’s economy and boosted the workforce during this period ("The
‘Upskilling’ of Cleveland's Workforce" 1). Also, the first quarter of 2015 marked the 19th
consecutive quarter for overall employment growth in the city (“Plus Review November 2015”).
This success marks a significant new increase and focus on highly-skilled workers in
Cleveland’s economy, and suggests other knowledge-based sectors like software development
and information technology will also feel the effects.
Experts say the success of these two sectors is a result of the strong universities and
colleges Cleveland has to offer. According to a study by the Center for Population Dynamics at
Cleveland State University, Cleveland experienced the same intellectual reinvigoration as
Pittsburgh thanks to their academic institutions. Further helping this growth is the rise of demand
for workers with advanced degrees. In 2000, only 10.5 percent of the regional work force was
highly educated (“From Metal to Minds” 3). As Figure 1 shows, the number of workers with an
advanced degree is now at a 20-year high in Cleveland and larger than the percentage of the
population in Pittsburgh and the average of the 40 major metropolitan areas.
Figure 1: The positive trend illustrates Cleveland’s increase in educated workers to a regional-high 17 percent since 1994. Now, Cleveland ranks as the 7th largest information technology cluster nationally ("From Metal to Minds" 3, 15).
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Based on these findings, it appears Rhiza, Inc. would find a large number of highly
qualified applicants to select from to fill the diverse positions needed at the new Cleveland
operations center. Cleveland, much like Pittsburgh, lost a significant portion of jobs due to the
decline of American manufacturing. However, the prevalence of quality secondary education is
fortifying the strength of the knowledge-based work force. Rhiza, Inc., as a software and
technology-driven company, is the kind of company that could take advantage of this growing
trend of high-skilled labor in Cleveland.
The Advantages of Operating a Business in Cleveland
By the advantages of operating a business, the report means the total benefits related to
opening and managing a new firm in Cleveland. This criterion focuses on factors like wages,
operating costs, tax rates, and location. These statistics are presented to show the advantages
Cleveland has over other popular technology hubs in the country.
Workers in Cleveland consistently perform quality work for below-average wages. Team
NEO, a non-profit advocacy group for Northeast Ohio, released a study with statistics from the
Bureau of Labor Statistics and Moody’s Economy that stated Cleveland workers demand an
average wage of $19.55 per hour. This is the lowest of all the comparable Metropolitan
Statistical Areas, including Pittsburgh (“Plus Review June 2016”). Combining this low cost with
the boom of well-educated workers in Cleveland means Rhiza, Inc. would be able to find
competent workers at a discount compared to in other possible expansion cities.
In addition, Cleveland has a low overall cost of doing business. Cleveland created tax
policies in an effort to be business-friendly and attract companies. Ernst and Young LLP and the
Council on State Taxation ranked Ohio third best in the country for pro-business tax rates (“Cost
of Doing Business). Additionally, the experts at Moody’s Economy report Cleveland is one of
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the most favorable major metro locations for businesses because the overall cost of doing
business has an index value of 84.2, which is significantly lower than the standardized U.S.
average of 100 (“Cost of Doing Business”). Part of this savings can be attributed to Cleveland’s
low real estate costs. Commercial real estate lease options average $3.90 per square foot in
Cleveland, only two-thirds of the national average. This is below those in comparable
metropolitan areas, including Pittsburgh (“Plus Review June 2016 Quarterly Economic
Indicators”).
Finally, Cleveland is advantageous because of its location. According to Team NEO and
Cleveland Plus, almost half of the American population is within 500 miles of the region, and
Cleveland has the largest number of consumers within a 250-mile radius than any other
metropolitan area in the entire country (“Access to Markets”). Rhiza, Inc. can reach the largest
number of consumers with the least amount of effort by moving to Cleveland.
Based on these findings, business like Rhiza, Inc. would benefit from opening another
office in Cleveland, Ohio. This city offers advantages like talented workers at a significantly
lower cost than other cities, inexpensive downtown office space and overall operating costs, and
unparalleled access to new consumers that would help Rhiza, Inc. thrive.
A Strengthening Economy
By the strengthening economy in Cleveland, the report examines the factors that
influence overall regional success for Rhiza, Inc. in Northeast Ohio. This criterion focuses on
long-term indicators of success independent of those already mentioned, which include general
measures of economic size and growth.
Experts cite a steadily-increasing level of production as one of the key signs that the
economy in Cleveland and other parts of Northeast Ohio is thriving and will continue to be
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strong. According to Moody’s Economy, the Gross Regional Product projected growth rate for
2015 was revised and increased an additional 1.3 percent in 2015, which boosted the overall 20-
year growth to 31 percent (“Plus Review November 2015”). This outpaced the fairly stagnant
growth rate for the country as a whole, which the United States Department of Commerce’s
Bureau of Economic Analysis reported as unchanged (McCulla and Smith 1). Former Cleveland
State researcher Richard Knight offers an explanation for the deviance from the national trend,
concluding, “Cleveland’s comparative advantage now takes the form of human and cultural
resources...that can be matched in very few other places” (“From Metal to Minds” 23). Northeast
Ohio has a unique makeup that facilitates faster annual growth than other areas in the country.
Other recent examples also support the stability of the city’s long-term growth. The
Downtown Cleveland Alliance released a study about the income Cleveland generates every
year. According to their data, Cleveland’s total aggregate income has increased by 23 percent
between 2011 and 2014 to a new high of $884.3 million (Downtown Cleveland Alliance 9). This
increasing percent change in income generated by the city is more evidence to support that
Cleveland’s overall economic growth is maintainable and will continue, which makes the city a
viable option for a business looking to expand.
Based on these findings, Rhiza Inc. could confidently move to Cleveland knowing the
relatively sudden economic success that has drawn attention to the region is sustainable. Unlike
the country as a whole, Cleveland continues to increase its rate of production. This suggests that
the city will be able to maintain its current level of growth and even increase it as the national
economy improves as well. These metrics indicate Cleveland is a booming city, and it is one in
which Rhiza, Inc. could find success.
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Cleveland’s Growing Civic Pride and Livability
By civic pride and livability, the report means to examine the increasing sense of pride
residents have for Cleveland and its amenities. This criterion focuses on developments in the
metropolitan area that would make the Millennial workers desired by Rhiza, Inc. likely to enjoy
living and working in the city.
Recently, Cleveland has undergone revitalization to make the city more attractive to
younger generations. A major $50 million renovation to the city’s Public Square concluded in
the summer of 2016. James Corner, the architect of the redesigned space, lauded Cleveland for
this investment in its public spaces. “It is an open platform for public life, for celebration,
enjoyment and delight; a place for workers, residents, families, children and visitors,” he said of
the improved Public Square (Litt). Figure 2 below showcases this modernization of Public
Square, a sign of the revitalization and source of pride in the city.
Also, the Downtown Cleveland Alliance advocated for the creation of an ambassador
program to beautify the city and make Cleveland more pleasant for residents. Over 60 people are
now maintenance and concierge ambassadors helping collect over 150,000 pounds of trash,
Figure 2: An artist rendering of the $50 million modern renovation to Cleveland’s Public Square. The project was completed in June of 2016 (Litt).
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providing safety escorts to over 1,000 people, and serving as concierges for over 8,000 visitors in
the second quarter of 2016 alone (Downtown Cleveland Alliance 14).
In addition to these revitalization efforts, Cleveland citizens are inspired to be more
passionate about the city because of the recent athletic successes. In just one year, the city has
seen the Cleveland Cavaliers win the NBA championship, the Lake Erie Monsters sweep the
Calder Cup, and the Cleveland Indians advance to the World Series. These victories have led to
pride in the city at a level unseen in the past half a century. More than 1 million people
celebrated together downtown for the Cleveland Cavaliers championship parade (Atassi). One
parade attendee believed it marked a new era for the city. She said, “finally, the pride that we've
all felt forever, everyone else can experience it… It's our turnaround. It's our time” (Atassi). Her
optimistic tone for the future is not unique and inspires Cleveland’s developments.
Finally, Cleveland generates civic pride by diversifying the entertainment provided in the
city. In addition to athletics, Cleveland boasts impressive cultural offerings. Playhouse Square,
the largest performance arts center in the country outside of New York City, attracts highly-
demanded shows like Hamilton to its lineup (Downtown Cleveland Alliance 11). In addition to
the performing arts and the world-class Cleveland Museum of Art, the city also placed statues
and speakers connected to the Rock and Roll Hall of Fame throughout the downtown area to
encourage exploration of the various neighborhoods (Downtown Cleveland Alliance 11).
Based on these improvements to the city’s livability and increase in civic pride, it appears
Rhiza, Inc. would be able to create a positive work environment after moving to Cleveland.
Technology-based companies are in need of Millennial workers, and these improvements to the
city’s public green spaces, cleanliness, sport performance, and artistic offerings all contribute to
a growing sense of pride that would make employees happy to work in Cleveland.
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Works Cited
"Access to Markets." Cleveland Plus Business. Team NEO, 2016. Web. 12 Oct. 2016.
Atassi, Leila. "More Than a Parade, More Than a Championship -- Cavs Victory Signals New
Day in Cleveland." The Plain Dealer. Cleveland.com, 22 June 2016. Web. 12 Oct. 2016.
"Cost of Doing Business." City of Cleveland Economic Development. Rethink Cleveland, n.d.
Web. 02 Oct. 2016.
Downtown Cleveland Alliance. “Downtown Cleveland Market Update Q2 2016” (2016). Rethink
Cleveland. <http://rethinkcleveland.org/Cleveland/
media/Cleveland/Data%20and%20Reports/Q2-2016-Market-Update-Pages.pdf>.
Litt, Steven. "Landscape Architect James Corner Hopes His Public Square Design Promotes
Democracy, Civic Harmony." The Plain Dealer. Cleveland.com, 24 June 2016. Web. 11
Oct. 2016.
McCulla, Stephanie H., and Shelly Smith. The 2016 Annual Update of the National Income and
Product Accounts. Rep. Bureau of Economic Analysis, United States Department of
Commerce. N.p.: n.p. (August 2016) 1-31. Print.
Piiparinen, Richey; Russell, Jim; and Post, Charlie. "Center for Population Dynamics Quarterly
Brief October 2015: A Reason to Be- The "Upskilling" of Cleveland's Workforce"
(2015). Urban Publications. Paper 1318.
<http://engagedscholarship.csuohio.edu/urban_facpub/1318>.
Piiparinen, Richey; Russell, Jim; and Post, Charlie. "From Metal to Minds: Economic
Restructuring in the Rust Belt" (2015). Urban Publications. Paper 1279.
<http://engagedscholarship.csuohio.edu/urban_facpub/1279>.
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Team NEO. “Plus Review November 2015 Quarterly Economic Indicators” (2015). Cleveland
Plus Business. <http://www.clevelandplus.com/business/wp-
content/uploads/sites/3/2016/08/November2015QER-3.pdf>.
Team NEO. “Plus Review June 2016 Quarterly Economic Indicators” (2016). Cleveland Plus
Business. <http://www.clevelandplus.com/business/wp-
content/uploads/sites/3/2016/08/June-2016-QER-5.pdf >.