How to Start a Tow Truck Business
Starting a towing truck business can be a very lucrative business venture. With the right knowledge and preparation it can also be very rewarding. Towing is no easy task, as there are many different aspects to consider when starting any new business.
Many towing companies simply start out with the owner as the only employee, but may quickly need additional help from employees or contractors as information spreads about the business or they are able to land huge contracts. Here's everything you need to know on how to start a tow truck business.
Do you have a passion for helping others? Would you like to make good money without much risk? If yes, starting a tow truck business is for you. In this article, I am going to provide you some tips on how you can start your own towing company. This article will help you in understanding the challenges that come with it and will also help you in overcoming them.
If you want to own a business with a reasonable start-up cost and the potential to make a living, consider towing. With just a desire for success in your pocket and a few tips for starting a towing business, you can start your own business and make a profit almost immediately. With mid-range start-up capital and low operating costs, you have the opportunity to build a high-demand business from scratch that offers a good return on investment - all without the need for extensive towing experience.
What is a Towing Company?
A towing company helps recover or tow disabled or abandoned vehicles at the request of an individual, government entity, association or corporation.
The Importance of a Having a Business Plan
If you have no idea how a towing business operates or maybe you are a first time business owner, I recommend downloading a business plan from BPlans. Their plans outline how the business is supposed to work and what you should expect. And at the bottom of this article, you can buy the towing company business plan plus the Wholesale Towing Supplies Vendor List, so you’ll know exactly where to get the equipment and supplies from.
Selecting a Business Name
The name of your business is one of the most important decisions you will make. Your business name is not just a label, but it also says something about what you do, how you do it, and who you are. It is the first thing customers see when they visit your website or read your marketing materials. If you are feeling stuck on deciding on a business name, you can use this Name Availability Search Tool to see if your website name is available first. It will suggest ideas for you.
After you buy a website name, it's time to officially register your business. You won't be able to accept payment for services until you complete this step. You'll need to register & apply for a federal EIN Number, and form an LLC or Corporation. I recommend using MyCorporation, as they do have a variety of packages to choose from, but their most basic package will get your painting business started right away.
Setup a Merchant Account
Once your business is registered and you have the LLC and EIN number, you'll need to activate a merchant account for your customers to pay you through. Many businesses are using paypal, square or stripe. I personally like Square, they make it super easy for me to accept payments online via my website, on email or over the phone. They have great tow company invoicing features and your employees and contractors can accept credit cards over the phone.
The account with square is free so, once you sign up, give these details to the web designer to setup your website to accept payments.
Setup Your Tow Company Website
If you don't know about Fiverr, it's a company that sells affordable web development and marketing services that get done really quick. You just type in what you want in the search bar, and it will reveal tons of people who are willing to help you get a website up in less than 3 days. Once you choose the person you want to work with, give them the bluehost details and communicate your vision and plans for the website.
Buy Tow Company Branding
Branding is a crucial part of any business. It’s important to create a brand that will be recognized, respected, and remembered. But branding doesn’t just mean the logo on your products. A brand is so much more than that! Your brand covers how you speak, how you respond to your customers, and how you present yourself as a company. It’s also important to take care of the “little things” like social media images or a professional email signature.
Make sure that your brand is recognizable by everyone who encounters it. I recommend using 99designs because the process is quick and painless and you actually get what you want. They will design a custom tow company logo, tow company brochures, tow company flyers and more.
For marketing materials, I really like envato, because they literally have tons of graphics for each and every single kind of business, on demand. Tow companies will usually need to start with a logo, website and email marketing banners, and some social media graphics. 99designs actually has what they call the ‘brand identity’ pack that will get you started right away.
Open a Business Bank Account
After you’ve chosen a name and registered your business, you can officially open a business bank account. It's pretty easy to open, but they won't get you set up without having the legal incorporation paperwork and the EIN number that I just spoke about. You can work with a local bank that you are already using or you can just choose a new one. Use this account to send all of your payments through. Square also has small business checking accounts. I trust them and have been using their services for a long-time.
Equipment / Tools Needed to Get Started
First of all, all businesses need a general business license from the local municipality, but towing operators may need an additional license. A business license is required to perform towing and recovery services in most areas. Contact your local and state government to find out requirements for your type of business.
People will often make the assumption that you need to own a tow truck to start, but this isn't necessarily true. As long as your state allows it, you can contract out for towing services with established companies and just add your mark up on top of their cost.
In some states, however, you have no choice but to own a tow truck yourself. If you're going down that route, it's worth noting that most states restrict the size of a tow truck and how many tow trucks a company can own. There are lots of companies out there that specialize in selling tow trucks or equipment for towing, so your best bet is probably to talk with your state and local government about what type of vehicle is allowed where you want to operate.
If you're limited by law on how many vehicles you can own and operate, it may be wise not to go through the trouble of joining a lot of different towing companies. If you can only own one tow truck, for example, and you want to work with 5 different cities, that means you need 5 different licenses at the very least. In many cases, tow companies will get paid by insurance companies for completed towing jobs, but they also get paid directly by the public when their vehicles are towed. The key thing you need to know is that there are two separate rates available for you to charge.
You should be charging hourly, and mileage rates. If you have your own tow truck, you are required to charge the state minimum hourly rate for what they call "drop" jobs. This means if someone calls you up to tow their vehicle from point A to point B, you can't charge them more than $XX.XX per hour (this price varies by location).
What does it cost to run a tow company?
This is a tough question, but I can talk about some of the costs you might want to consider. First and foremost, it's going to be expensive to operate a tow truck (see above), and it will probably end up being your biggest expense. If you plan on hiring employees or simply working as the only tow truck driver, you should make sure you have enough money to cover all of your expenses. If you're planning on running the company by yourself without employees, don't forget to budget for miscellaneous costs like licenses and insurance (see below).
Here's a list of some items you'll need to have before you can open up a tow company:
- Towing vehicle(s)
This is the first step. You'll need one tow truck (though you can buy more later), and it needs to be properly registered, insured, and equipped with all the necessary safety features. It goes without saying this will cost a lot of money.
- Business licenses
This will depend on how you plan to operate your tow company. If you're going the route of using an existing towing provider, they might have their own licensing that covers everything you need, but it's always a good idea to check into all the details just in case.
- Business Insurance
You'll need to carry full coverage on all of your tow trucks, and you should increase the total amount covered as high as possible (at least $5M). Keep in mind this is a separate policy from whatever your state requires for keeping a tow truck on the road.
- Liability insurance
This is important to keep in mind if you're working as an independent contractor. It covers the towing company and driver just in case something happens and a client or their vehicle is injured or damaged while they're being towed.
- Worker's compensation plan
If you plan on hiring employees, this is required by law. Costs will depend on how many people you plan on hiring.
- Office space
If you don't already have an office for your tow company, you'll need to find one before opening up shop. It's not exactly cheap, but it's often not as bad as anticipated.
One of the main costs associated with operating a tow truck is gasoline. Even if you're going to be using a tow provider, you'll still need a fuel card in order to cover the expenses.
- Tools and equipment
You'll want to have all of your equipment up front before opening for business. That includes any necessary tow truck tools, computers, printers, phones, etc., but keep in mind some of this might be handled by the towing company you buy from if they have a deal with your supplier.
Don't forget about general supplies, business cards, and signage as well as any fees associated with opening up a business account for credit card processing or getting a merchant ID so you can accept them (more on that below).
If you are serious about starting a towing business, you should definitely consider buying these types of towing and recovery equipment for your business:
Tie Down Straps & Chains
Ratchets & Hardware
Rigging & Recovery Equipment
Jump Start Equipment
Air Compressors & Tanks
Steering Wheel Locks
Flash Lights & Truck Lights
Forms & Manuals
Reflective Tape & Traffic Cones
Emergency Warning Lights
Winches & Safety Equipment
V-chain & V-strap assemblies
If you need to learn where to buy these suppliers, get the towing equipment vendor list.
Choose the Services You Will Offer
Whether you are an experienced in the transport industry or a newbie, starting a towing business can involve many questions and considerations, some of which are unique to working in the towing industry. Starting a towing business will cost approximately
US $ 150,000 at the lowest cost, but launch costs can be as high as US $ 2 million for
larger and more extensive towing operations.
Most entrepreneurs prefer to start small and scale slowly as the business grows, but it is totally possible to start as a larger enterprise if your financial resources permit. Establishing consistent operating procedures and adhering to them to run your business smoothly is an important factor in this business.
When it comes to pricing your tow services, look for other towing companies in your area to get an idea of how much to charge for your services. Of course, you can always talk to another towing business owners for their opinion on how much it costs to get started. When starting a new business, make sure there is sufficient local demand for the towing service, or consider offering specialized towing services, for government entities, like road side assistance and DUI auto immobilization services.
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About Adella Pasos
This Entrepreneur and Marketing Expert has shared her passion for growing brands from the ground up. She’s worked with Startups, Small Businesses, Fortune 500 Corporations and Entertainment Talent to help them recognize the value of marketing, and give her clients the ability to access their niche market via online, social media, mobile, merchandising, and events.
She hosts the What's Your Game Plan TV show features: Free Expert Advice, and Growth strategies for Business Owners Across the Globe. Access thousands of FREE Tips, Trends & Tools to Move Your Business Forward!