Entrepreneurs who've been lucky enough to receive personal business advice from Warren Buffett know that when the "Oracle of Omaha" speaks, you should pay attention.
Adam Xavier, co-founder and CEO of motorcycle security company RoadLok, is one such entrepreneur. RoadLok's flagship product is a bike "immobilizer" that locks wheels in place, making it harder for motorcycles to be stolen. The device also acts as a safer alternative to wheel lock systems that can cause accidents when motorcyclists forget to take them off.
When Xavier was just starting RoadLok in 2005, he sent Buffett his company's business plan hoping the Berkshire Hathaway CEO might respond with feedback. About six weeks later, Buffett returned the proposal with handwritten advice on how to tweak his idea and think bigger, Xavier says. Buffett did not return a phone call for comment.
Today, Los Angeles-based RoadLok has sold more than 27,000 units of its patented product, which sells for between $240 and $300. Xavier declined to disclose annual revenues. The company also has worldwide distribution and has inked partnerships with several large motorcycle brands. Here are three tips Xavier received from Buffett that have contributed to RoadLok's success.
1. Identify your threats. On the business plan Xavier originally sent Buffett, Xavier wrote that RoakLok did not have any threats because the product was patented. What was Buffett's response? "No investor will ever agree with that," he wrote. Just because your company has a patent doesn't mean you won't face challenges from competitors, especially once your business grows to the point that other entrepreneurs in your field start to take notice of you. The lesson? Think about the problems you don't have today but that you might encounter once you start to scale.
2. Find a path to recurring revenue. When Xavier pitched his bike lock company to Buffett, the business model dictated that customers would make a one-time purchase of the product for their bike. Buffett encouraged Xavier to attack the market in another way by exploiting opportunities in insurance and other subscription-based offerings. Now, RoadLok has added its own insurance policy on top of its product that will reimburse customers up to $5,500 if their bike is stolen while using RoadLok.
3. Align your company with a strong brand. After reading Xavier's business plan, Buffett advised him to pursue original equipment manufacturers that would resell RoakLok's product under their own name and branding. During the past few years, RoadLok has teamed up with major motorcycle brands like Harley Davidson, KTM and Yamaha, and is in the process of negotiating a deal with Ducati. All of these partnerships have helped expand RoadLok's distribution.
In addition to helping Xavier with his business model, Buffett also introduced RoadLok to auto insurance company GEICO, which partnered with RoadLok on an incentive program.
Though Xavier admits he was fortunate to get a reply from Buffett, whom he's still never met, he says that persistence--not dumb luck--is the key to long term success as an entrepreneur.
"You have to be prepared to hear a no 99 times and get a yes on the 100th time," he says.