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 rmcgowan19@jcu.edu 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 >.