Solutions Management .............
     a new approach to the troubled company.

Chapter Three: Re-Group... Reversing the Downward Trend

Our first priority is to stop cash losses immediately. OEM Capital Corp. redeploys resources to areas that are likely to have the greatest impact on sales. Increasing available funds to pay trade creditors may be inappropriate if the causes of decline have not been corrected first.

Quickly Reduce Costs
Our first step is to cut costs to a level which supports current sales rather than expected sales which may not materialize. OEM approaches cost cutting in a careful but timely manner. Often accounting oriented "hatchet men" hack an organization to such an extent that there is little left to save.Instead we look carefully at all costs - even contracts which are assumed to be inviolate. OEM Capital Corp. recently represented a manufacturer who had a long term lease on its 110,000 square foot production facility. We candidly reviewed the company's financial statements with the landlord who, when faced with the prospect of his tenant going out of business, agreed to forgive 50% of the rent during the period of the cash squeeze.

Reallocating Resources to Increase Sales
Increasing expenditures in a declining business which faces a cash squeeze may seem bizarre, but there are situations in which it would be foolish not to spend additional money.In periods of economic downturns, competition always becomes more intense. It is vital to maintain the loyalty of existing customers and continually reach out for new sales opportunities.To achieve this, it may be necessary to increase the sales force, supplement customer services or improve product value.Without such a program, stronger competitors may secure a greater market share.

Renegotiate Payment Terms
Very often the management of a troubled business has had little experience in negotiating more favorable payment terms from its trade creditors and lessors and quickly succumbs to onerous demands that can adversely affect future performance. OEM Capital Corp. has found that it is important to have a candid but firm approach with all creditors in order to demonstrate the need for concessions as required.

Purchase of Related Product Lines or Businesses
Increased volume is usually a solution to an under-performing business.On previous assignments we have identified product lines which could be easily added, thereby substantially increasing sales at little cost. This type of transaction may often be accomplished by paying minimal cash down and a royalty.OEM has also initiated negotiations and arranged financing for the purchase of a competitor or a complementary business in an industry undergoing consolidation.By using the combined businesses to demonstrate greatly improved cash flow and profitability, equity dilution is minimized.