A year ago, Richard Klein’s battery wholesale business was struggling. Sales at his Culver City-based Advanced Battery Systems had dropped 10 percent and some of his customers weren’t paying their bills on time.

“I had three kids in private school, my wife wasn’t working and I was in a low-margin business where the cash just wasn’t coming in,” said Klein, 52. “I realized I needed to become more bankable and improve cash flow immediately.”

So Klein sought help for his 25-year-old business, which sells automotive batteries, consumer electronics batteries and chargers to auto part shops, automotive fleet operators and various battery retail outlets. The company has a small retail space with shelves full of batteries and chargers. Larger automotive batteries are stored in nearby warehouse rooms.

Klein had heard about a counseling program that Goldman Sachs Group Inc. had just launched in Los Angeles called 10,000 Small Businesses. The $500 million nationwide initiative was crafted amid the public backlash against major Wall Street investment banks after the financial collapse.

Klein, who calls himself a “lifetime learner,” applied for counseling and was accepted. Part of the program included a crash course in basic business finance at Los Angeles City College. Klein was also assigned an adviser who examined his business from top to bottom and helped him come up with a turnaround plan.

So far, the results have been promising. Revenue rose 25 percent in 2010 to $3.5 million and he’s been able to add four employees.

Cash crunch

Klein has also been approved for a six-figure loan through the program and hopes to use the money to embark on an ambitious expansion plan, opening satellite offices and adding an additional 10 people to his staff of 17.

Klein applied to the Goldman Sachs program because he thought he needed help improving his cash-flow situation. The adviser assigned to him through the program, Sharon Peterson of the U.S. Small Business Administration’s Los Angeles Small Business Development Center, said Klein needed to look for the source of his problem instead of treating the symptom.

“Cash-flow problems are a symptom of many other things,” Peterson said. “You have to look at what else was happening that affects the cash flow.”

In Klein’s case, Peterson identified two key problems: expensive inventory that was not selling and the lack of a strategy to free up cash when customer payments weren’t coming in on time.

In a business like Advanced Battery Systems, which sells hundreds of different types of batteries, matching inventory to customer demand is crucial. While it’s important to always have several batteries of each type on hand in case a customer wants to order several at a time, if too many batteries go unsold before their shelf life expires, that’s money down the drain.

Peterson recommended that Klein review his battery lines to see whether any expensive ones should be dropped and whether some others should be expanded.

Klein said he decided to drop vehicle batteries from one manufacturer because the margins weren’t good enough.

Peterson and Klein then tackled the issue of freeing up cash. Klein consolidated some debt and refinanced some loans to lock in lower interest rates.

Klein then took advantage of “prompt pay” discounts from vendors, generally 2 percent off the bill if he paid a vendor within 10 days. He also joined the Battery Electrical Specialists Association, in part to be eligible for discounts on purchases from battery manufacturers in the organization.

Growth

Each of these steps made a small impact, but together, the changes added up and cash flow started to improve.

With more cash coming in, Klein and Peterson turned to the other major goal: growing the business. For most of the company’s lifetime, more than half of total revenue had come from independent automotive garages and auto parts stores.

Take Don Engler, co-owner of Engler Brothers Auto Parts in Santa Monica, who has dealt with Klein for more than 20 years.

“Any type of battery we need, he’s got,” Engler said. “And his prices tend to be just a little bit better than others in the area.”

But independent garages and auto part stores are gradually disappearing. Auto dealers have moved aggressively into the repair business as have chains such as Jiffy Lube International Inc. Both auto dealers and Jiffy Lube order their car batteries direct from manufacturers, cutting out wholesalers like Advanced Battery Systems.

Also, Wal-Mart Stores Inc. and Costco Wholesale Corp. have entered the vehicle battery market and have used their market power to undercut the prices of wholesalers like Advanced Battery Systems. In addition, the Automobile Club of Southern California carries batteries for sale on calls to stranded motorists. Previously, the organization would recharge dead batteries and send motorists to Pep Boys or other car repair shops.

So, in order to grow, Klein has had to find new customers for his batteries.

Using advice from Peterson and information from the class he was taking, Klein launched an initiative he called the “power of choice” for his customers who manage vehicle fleets. The goal: to better calibrate the types of batteries they need. Instead of selling just one type, Klein and his sales staff look at the power demands of the different vehicles in the fleet and sell different types of batteries at different price points. Trucks with low-power requirements can be supplied with cheaper batteries (generally costing about $75 each), while vehicles such as forklifts that need more power get more powerful batteries that cost more than $200.

“A program like this is very attractive for fleet managers because they save money and get the right types of batteries,” Klein said.

This has helped Advanced Battery Systems to target more of the lucrative vehicle fleet market, both in the private and the government sectors. Sales to fleets now account for nearly 40 percent of the company’s total revenue, up from about 10 percent five years ago.

The company is also going after new markets, such as batteries for golf carts and medical devices. And Klein is using the social networking sites like LinkedIn to make connections within the industry.

Klein said he’s now ready to move forward with his expansion plan. With the cash-flow crisis behind him, he said he actually has been able to enjoy running the business.

“It’s more fun now than it has been in years,” he said.

Advanced Battery Systems

Year Founded: 1986

Headquarters: Culver City

Core Business: Wholesaler of auto and consumer batteries and related equipment.

Employees: 17

Goals: Increase sales to government agencies and fleets; expand into new markets. Double revenue and add 10 employees.

The Numbers: $3.5 million in revenue last year, up 25 percent from 2009.