Find out how to start a tow truck business so you can start driving the roads and assisting drivers as needed. Here are the basic steps:
- Write Your Business Plan
- Register Your Business
- Secure Startup Funding
- Obtain Licenses, Permits, and Business Insurance
- Be a Responsible Employer
- Promote Your Towing Business
Having the knowledge you need to launch your own tow truck company involves a sizeable financial investment but offers reliable long-term returns. Nevertheless, wrecker businesses offer necessary services, and the sector does well even in recessions.
How to Start a Tow Truck Business?
Write Your Business Plan
The development of a prosperous tow truck business will be guided by your business plan.
Consider Which Clients You Want to Serve
Roadside assistance comes to mind when most people think of tow trucks, in case they ever experience car trouble while on the road. You can, however, provide a range of services and cater to customers from different industries. Here are a few services and industries to consider:
Roadside assistance for the general public
- Towing impounded vehicles
- Towing services for the city
- Auto repair shops
- Law enforcement
- Auction houses
Financial Planning
You’ll be better equipped for success later on if you have a firm grasp of your finances early on. What keeps your business operating is capital. Without it, you’ll have to quickly lock your doors and stop operations. Here are some steps to be mindful of when planning your finances:
Create a business budget
Your ability to pay for overhead expenses and grow your business is guaranteed by a carefully thought-out budget. If your company is experiencing a loss, review your budget to determine where you can cut expenses.
When creating a business budget for a towing business, here are some recurring expenses and startup costs that you’ll want to account for:
- Licenses and permits
- Purchasing tow truck(s)
- Tow truck insurance
- Employee salaries
- Business insurance
- Marketing expenses
- Vehicle maintenance
- Gasoline
- Choose your equipment
The most expensive but crucial investment you can make in your company is probably a good tow truck. Up to $100,000 can be spent on a brand-new tow truck. However, you can save money without compromising performance by buying a used tow truck. Here are the various types of tow trucks you can expect to use for your business:
- The most popular towing vehicle is a flatbed truck. Moving the towed vehicle into position and securing it to the flatbed is simple thanks to its long, empty bed and flat top.
- Integrated tow truck: These heavy-duty tow trucks frequently have additional axles for towing big vehicles, like big trucks or buses.
- Before the flatbed truck took over, hook and chain tow trucks were common. The best use for this kind of tow truck is to transport totaled cars to a junkyard.
- Your equipment requirements will vary based on the type of towing business you start. However, flatbed tow trucks are the most popular and adaptable kind of tow truck. They should be flexible enough to handle the majority of client interactions.
- Separate your personal and business expenses
- Any business owner must carefully divide their personal and corporate assets. That’s why it’s recommended to open a business bank account. This extra step acts as a financial barrier that serves two useful purposes:
- Taxes: It will be simpler for you to review your business expenses for tax write-offs if a distinction is made between your personal and business assets.
- Personal liability: In order to benefit from your various personal liability protections, you will need to keep your personal and business assets separate if you decide to form an LLC or corporation. This safeguards your private property in the event of any legal or financial disputes.
- Simply separating your personal and business assets by opening a business bank account is one method. Another tip is to open a business credit card, which you’ll use for all your business-related expenses.
Price Your Towing Services
You’ll charge your clients for towing vehicles in order to generate income. This cost includes a flat towing fee, a mileage charge, and occasionally a storage fee.
The prices for many tow truck companies’ services range from $75 to $125. You can then add an additional $2 to $4 for each mile the car is being towed on top of this base price. For each night the car is in your care, you can charge a storage fee if you’re keeping it for a long period of time.
Register Your Business
Before you can start doing business, you must finish up a few necessary paperwork tasks. Registering your business with your state and local agencies will require you to complete the following steps:
Choose a Business Entity
Your risk exposure and tax filing procedures will be impacted by the business entity you choose. We’ve narrowed down your options to the three most common ones:
- The simplest and least complicated business structure is the sole proprietorship. You file your taxes jointly for your personal and business use. This simplicity has a price, though: you assume full responsibility, putting both your personal and professional assets in jeopardy. When you’re employed in a risk-prone sector of the economy, this choice might not be the best one.
- Limited liability company (LLC): LLCs can be established either by a single person or by a number of individuals. Because you have some personal liability protection, this business structure is appealing for tow truck companies. You are safeguarded as an individual throughout a legal dispute.
- Corporation: Establishing a corporation might be right for you if your objective is to aggressively grow your company to, say, a national brand. Many of the liability defenses and tax advantages enjoyed by LLCs are also shared by this independent entity, in addition to others. Writing bylaws and creating a board of directors are just two of the additional documents needed.
Secure a Unique Business Name
Within the United States alone, there are more than 30 million registered businesses. Your company won’t be confused with other businesses if it has a distinctive name. After you’ve found a business name that you’re satisfied with, confirm its availability with your secretary of state’s office and the U.S. Patent and Trademark Office.
Make sure the domain name is still available by checking. It’s crucial to establish an online presence for marketing reasons. Check the availability of the domain name using websites like Name.com or GoDaddy.com.
Register for An Employer Identification Number
As your towing company grows, you’ll probably hire more drivers. Prior to doing so, you must apply for an employer identification number (EIN) online with the IRS. When filing your business taxes, requesting funding, and other situations, this number is crucial.
Secure Startup Funding
Your business plan’s realization is triggered by obtaining startup capital. Because buying tow trucks can be an expensive expense, this is frequently required when starting a tow truck business. Here are a few ways to secure the funding you need to kickstart your tow truck business:
Apply for a Business Loan
Usually, the first step in applying for a business loan is to check with your bank. Banks, however, are frequently reticent to partner with start-up companies that haven’t demonstrated a track record of profitability. Fortunately, there are other options to take into account, including SBA microloans that are especially geared toward new entrepreneurs and online alternative lenders.
A more specialized form of financing is an additional option to take into account. Your tow trucks will probably be your biggest expense, so you might want to look into commercial truck financing. This is essentially equipment financing, but specifically for trucks. Even if your financial situation isn’t ideal, you might still be able to qualify for the loan because your trucks will act as collateral in this case.
Self-finance Your Business
This approach, also known as bootstrapping, is for those who already have the financial resources to launch their business. Self-financing requires sound money management because your personal cash reserves are at stake. So, if you plan to self-finance your company, it is advised that you take more time with the financial planning portion of your business. The advantage of full ownership of your company outweighs this additional risk, though.
Friends and Family
To get your business off the ground, you can also choose to ask your friends and family for financial support. To ensure that both parties are in agreement regarding the terms of repayment, keep in mind that even though this may seem informal, you’ll need to create formal paperwork. If your immediate network is exhausted, you might also think about funding your business idea through crowdfunding.
Obtain Licenses, Permits, and Business Insurance
You must apply for specific licenses and permits in order to run a tow truck business. Be sure to confirm that you are adhering to the necessary requirements by calling the department of transportation in your state. Generally, tow truck business owners will need to secure the following licenses and permits:
Get Licenses and Permits
The majority of small businesses require a license or permit of some kind in order to operate. These vary depending on the kind of business, the location, and the laws.
State governments typically regulate the auto towing industry. But you may also require the following:
- Basic business operation license:This is a permit issued by the city in which your company will operate, or by the county in the area if it will operate outside the city’s legal jurisdiction.
- Zoning and land use permits:Certain commercial activities may be restricted in specific areas by local government zoning laws.
- Building permit:A building permit is required if you intend to construct or remodel a commercial building.
To find out which licenses and permits you require, visit the state and local websites. And make sure to manage your licenses over time, keeping track of when you’ll need to renew them.
Specialized Licenses and Permits for the Tow Truck Industry
You’ll also need to apply for a number of additional licenses and permits if you plan to operate a tow truck business. Check with your state’s department of transportation for a definitive list, but the following licenses and permits may be required:
- Class B commercial driver’s license:You are now permitted to tow a trailer weighing no more than 10,000 pounds or drive a vehicle weighing 26,001 pounds or more without a trailer.
- Oversize/overweight vehicle permit:If you drive a big tow truck that has a higher load capacity, you’ll need this.
- Towing company licenses: For tow truck businesses, some states demand a unique license.
- Consent tow permit: necessary if you want to run a consensual tow truck business.
- Non-consensual towing permit: This enables you to tow a vehicle away without the driver or the owner being present.
- Incident management permit: provides you with authorization to tow a disabled vehicle on or close to a public road as long as the action has no negative effects on the flow of regular traffic.
- Private property permit: required to conduct a non-consensual tow on a parking lot of a private facility, such as a hospital, company, or apartment building.
Insurance for Towing Companies
The right insurance can protect you in the event of an accident if you run a tow truck business, which can be risky. Consider the following policies:
- Auto liability insurance:The other driver’s property and medical costs are covered, protecting you in the event that you cause an accident and cause damage.
- Physical damage insurance:includes any collision-related tow truck repairs.
- Comprehensive coverage:includes incidents that aren’t related to accidents, like fire, animal collisions, theft, and falling objects.
- On-hook coverage:This policy will protect you if the vehicle you are towing sustains damage.
- Uninsured motorist insurance:protects you in the event that an uninsured driver causes you or a passenger harm.
- Workers’ compensation insurance:If you have employees, most states have laws that you must follow.
Be a Responsible Employer
There are a number of occupational health and safety (OSHA) regulations that you must adhere to if you intend to hire staff. For instance, you need to offer safety training, prominently display your employees’ rights in the workplace, and make sure your drivers are educated and in possession of a Class B driver’s license. And lastly, you must document any illnesses or injuries that you may have sustained at work.
Promote Your Towing Business
Consider the methods you will use to promote your company. Here are some tips for marketing your tow truck company:
- Launch a website:Make a website that includes a form for online quote requests or bookings, along with a list of your services, background, and any applicable licenses and permits. Make sure your website is search engine optimized so that it will appear high when people search for two truck services. Your body copy, headers, and metadata should all contain important search terms and phrases. Finally, make sure that both desktop and mobile users are taken into consideration when designing your website. Read the Top 3 suggestions for creating a business website for more information.
- Create social media and review profiles:Establish company profiles and accounts on social media sites like Twitter, Facebook, Yelp, Google My Business, and so that you can post updates, news, and reviews.
- Get positive reviews:Reviews on websites can make or break a company. Ask for reviews and testimonials from your customers frequently, then post them on your website (with their consent). Keep an eye on social media reviews and politely respond to any unfairly negative ones.
- Network:Introduce your company to nearby companies like auto dealerships and repair shops as well as to companies with private parking. Join the local chamber of commerce and other organizations for small businesses.
- Advertise:Use your marketing budget to purchase advertisements for your business in regional newspapers, discussion forums online, radio, and on roadside billboards. Print flyers and business cards, then hand them out to nearby establishments.
Why Start a Towing Business?
If you want to launch a business that offers stability and little stress or excitement, a towing company might be the best option. The towing company additionally offers you the following advantages.
High-profit Margins
The average net profit for your towing truck is around 90%, which is very high and enables you to expand your company while easily controlling expenses.
You Are Your Boss
When you buy a towing truck, you are essentially in charge of all operations. Making decisions can be liberating and empowering.
You Have a Good Eye for Mechanics
Although a tow truck driver might not be required to fix the cars they tow, having a basic understanding of mechanics can help you spot car problems and give customers advice. In addition, you might be able to repair a truck yourself if something goes wrong.
You Thrive in High-stress Scenarios
Even if you follow the law, you will almost certainly come across numerous uncooperative car owners who argue and act aggressively when you try to tow their car. However, if you have good stress management skills, the towing industry is a good fit for you.
It is Highly Scalable
With businesses and processes constantly changing, your company will require new services, features, and products. To reach a wide range of customers, you can also use a variety of business models and pricing tiers.
FAQs
What is a Flatbed Truck?
Large trucks with a flat body and no sides, as well as a roof that encloses the bed, are called flatbed trucks. Large loads that won’t be harmed by bad weather or rough roads are typically transported using these trucks. They are perfect for loads that are too big for enclosed-body trucks thanks to their distinctive bed design.
How Much Do Tow Truck Drivers Get Paid in the United States?
A tow truck driver’s yearly salary ranges from $43,544 to $71,789, with a median salary of $56,074. Make sure they comply with the strict salary regulations because it can be expensive to mistakenly classify someone as a salary.
What Kind of Assistance Can Customers Expect from Your Towing Men?
Under the heading of emergency roadside assistance, towing professionals provide a wide range of towing services. In the event that a customer runs out of fuel, they can count on your professionals to refill the tank. Likewise, if they require assistance with flat tires, your towing providers will either replace the tire or re-inflate it, depending on the circumstances.
What is the Physical Damage Insurance Coverage?
A group of insurance plans that cover physical damage to your vehicle are referred to as such. This broad term includes both collision and comprehensive insurance options, as well as the choice between full comprehensive coverage and the more constrained fire and theft with Combined Additional Coverage (CAC) insurance.
Conclusion: How to Start a Tow Truck Business?
It is possible to launch a successful tow truck company, but it will require perseverance and commitment on your part. Spend as much time as necessary creating your business plan; don’t be afraid to. It will assist you in being successful and obtaining startup funding, particularly when buying your tow trucks.
Following these guidelines, obtaining the required startup funding, and having a passion for helping your clients will increase the likelihood that your tow truck business will be successful.
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