How To Start A Tow Truck Business

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How To Start A Tow Truck Business

You’ve made decisions on your behalf: you’re going to start a tow truck business. Congratulations! Being your own employer provides a lot of flexibility, and knowing that you developed something is tremendously fulfilling. Towing, on the other hand, is not for the faint of heart.

Starting a tow truck business is a difficult yet thrilling endeavour. You have the freedom to choose how you want to operate your business, who you want to hire, and what kind of contracts you want to accept. Then, if you want to create a business that delivers a sense of continuity while minimizing stress and unneeded excitement, a towing firm may be the way to go. It’s not that operating a tow truck is monotonous. In reality, truck drivers encounter a lot of interesting individuals on a daily basis, which makes the job fairly pleasurable. Even though the work isn’t going to be demanding for you, the nature of towing is often assisting individuals in stressful situations. That in and of itself may be satisfying.

In this article, we’ll look at towing company statistics and numbers, explore the attributes that qualify someone to start a tow truck business and go over the processes required to get a towing business up and operating.

So, Here Is How To Start A Tow Truck Business:

Step 1: Select the sort of towing business you want to run.

Consensual towing (such as roadside assistance and relocation services) and non-consensual towing are the two business models used by tow truck businesses.

Non-consensual towing happens when a towing business collaborates with police authorities and property owners to remove automobiles parked unlawfully or without authorization. This type of labour can generate a constant stream of revenue, but it also entails a lot of conflicts. It is difficult to work with disgruntled automobile owners. Furthermore, operators of non-consensual tow truck firms must follow municipal legislation that governs where and how long vehicles can be held. They must also be prepared to appear in court for car seizure situations. Before you start your firm, you should think about these elements as well as your location. You may even provide both towing services.

Step 2: Create a business plan.

A business plan is required to ensure the success of your tow truck business. A well-thought-out plan may help you direct your strategy, identify risks, and acquire capital to extend and grow your business.

Here’s a recommended outline for your tow truck business plan to get you started:

  • Brief summary: A quick description of your company and why it will be successful.
  • Description of the company: Describes your company’s competitive advantages and provides thorough information about it. Include the services you will provide, such as post-accident, breakdown, and unlawful parking tows.
  • Management and organization: What your company’s structure will be, and who will run it. Who will be in charge of day-to-day operations?
  • Market research: What is the forecast for the industry? Who are your ideal clients? What kind of competitors do you have? Market research is a crucial tool for understanding the market and should be focused on early in the planning process.
  • Plan your finances: A description of your finance requirements, thorough financial accounts, and a financial statement analysis are all required.
  • Strategy for marketing

Step 3: Learn about the beginning costs of a tow truck business.

Tow truck company beginning expenses are greater than for other sorts of businesses, ranging from $150,000 to more than $1 million. This is primarily due to the initial outlay for towing equipment. Here are some of the initial charges you should be aware of.

  • Permits and licenses
  • Towing vehicles or towing equipment
  • Insurance for businesses
  • Automobile insurance
  • Overhead expenses (mortgage, utility, and other miscellaneous costs)
  • Accounting charges
  • Uniforms for drivers

Determine the continuing costs of running a tow truck business.

Vehicle maintenance, gasoline, staff compensation, marketing and advertising charges are all recurring expenses that must be budgeted for.

Clientele that is caught in an emergency automobile issue or companies looking to tow illegally parked vehicles will be your major customers. A solid marketing effort through advertising and word of mouth can assist potential consumers to remember your company when they are in a bind.

Decide how you will charge your consumers.

Tow truck firms often charge a minimum base rate of $50 for local towing of five or ten miles or a hook-up fee of $75 plus $2 to $4 per mile for long-distance towing.

Remember to include the following in your towing rates:

  • How far must you tow the vehicle?
  • How big is the car you have to tow?
  • How tough it is to transfer the car to the tow truck
  • Is it necessary to employ a flatbed truck?
  • The hour of the day

Determine how much profit your tow truck company can make.

To establish how much a tow truck company may make, various elements must be considered, each of which varies from one firm to the next. For example, the number of people you hire, the extent of your services (will you run 24 hours a day? ), and whether your money is derived from agreements with service shops or if you operate independently will all have an influence on profitability.

Economic situations, such as high fuel prices or fewer automobiles on the road owing to a recession or shutdown, may also have an influence on your profitability. Even a robust economy can lower your workload if people buy newer automobiles that are less prone to break down.

Consider broadening your employment to two repossessed automobiles on behalf of leasing firms and banks to increase your revenues.

Step 4: Register your towing company.

You may have to register your new tow truck business with your state and/or local government, depending on your location and business structure.

To do so, LLCs, corporations, and general partnerships must register (either online or by mail) with the secretary of state or the business agency where they do business. Importantly, if you want to conduct your business under a name other than your own (even if you are a sole owner), you must register that business name with state and/or municipal governments, a procedure known as submitting a “doing business as” (DBA) name.

Obtain federal and state tax identification numbers.

You may need to register your firm with the IRS and receive an employee identification number before you can pay business taxes (EIN). An EIN is your company’s equivalent of a social security number, and it is necessary for state and federal tax filings. (Note: If you are a sole owner with no workers, you do not require an EIN. Instead, you will use your social security number to file your taxes.)

An EIN is also required to create a company bank account and keep your business and personal funds separate. A state tax ID may also be required. Typically, you’ll need to obtain an EIN before applying for a state tax ID. Check with your state or a company lawyer for specifics, as the process varies by state.

Step 5: Establish a company bank account and a credit card.

A corporate bank account and credit card separate your personal and company transactions and provide some legal safeguards. Maintaining a company bank account, for example, helps you preserve liability protection and the security of your personal assets if your LLC or corporation is sued or held accountable. 

A bank account and a credit card also assist to develop company credit, which suppliers and vendors will check before doing business with you. As a result, establish your company accounts as soon as you begin incurring business expenditures or taking money.

Step 6: Obtain licenses and permissions.

To function, most small firms require some kind of company license or permission. These differ depending on the sort of business, geography, and legislation.

Typically, state governments control automotive towing firms. However, you may also need the following:

  • Basic business operation license: It is a license from the municipality wherein your company does business, or from the state or county (if the business will operate beyond the legal limits of the city).
  • Zoning and land use permits: Particular commercial activities may be prohibited in certain regions by local government zoning rules.
  • Building permit: If you intend to modify or develop a business location, you must get a building permit.

Visit the websites of your state and local governments to see which licenses and permissions you require. Also, remember to maintain your licenses throughout time, keeping note of when they need to be renewed.

Tow truck licenses and permits are specialized licenses and permissions.

Running a tow truck business necessitates the acquisition of a number of extra licenses and permissions. Check with your state’s transportation agency for a complete list, but the following licenses and permits may be required:

  • Commercial driver’s license (Class B): This license allows you to drive a vehicle weighing 26,001 pounds or more without a trailer or to pull a trailer weighing less than 10,000 pounds.
  • Oversize/overweight vehicle permit: Required if you run a big tow truck with a load capacity that exceeds the usual limit.
  • Towing business licenses: Some states require tow truck firms to get a particular license.
  • If you want to run a consensual tow truck firm, you’ll need a consent tow permit.
  • Non-consensual towing permit: This permits you to remove and tow a car without the presence of the vehicle’s owner or driver.
  • Incident management permit: Allows you to tow a disabled car on or near a public road as long as the operation does not disrupt regular traffic flow.
  • Private property permit: Required for a non-consensual tow on a private property, such as a hospital, company, or apartment parking lot.

Insurance for tow business.

Running a tow truck company may be dangerous, and having the proper insurance will protect you in the case of an accident. Consider the policies listed below:

  • Auto liability insurance protects you if you cause an accident and covers the other driver’s property and medical bills.
  • Physical damage insurance pays for any repairs to your tow truck that occur as a result of an accident.
  • Non-accidental accidents such as fire, animal collisions, theft, and falling items are covered under comprehensive coverage.
  • On-hook coverage: This policy will protect you if the car you are towing is damaged.
  • Uninsured motorist insurance: Covers bodily harm or death caused by an uninsured driver.
  • Workers’ compensation insurance is required by law in the majority of states if you employ people.

Step 7: Hire Employees 

If you intend to hire employees, you must adhere to a number of occupational health and safety (OSHA) regulations. For example, you must give safety training, conspicuously display your employees’ rights in your workplace, and guarantee that your drivers are trained and hold a Class B driver’s license. Finally, any work-related injuries or illnesses must be documented.

Step 8: Promote your tow truck business

Consider how you will spread the news about your company. Here are some marketing ideas for your tow truck company:

  • Create a website: Create a website that contains an online request, a quotation or booking form, as well as a list of your services, expertise, and appropriate licenses and permissions. Make sure your website is search engine optimized; this will guarantee that your site ranks high when someone searches for two truck services. In your body content, headers, and metadata, include relevant search terms and phrases. Finally, make sure your website is built for both desktop and mobile customers. Read Top 3 Tips for Creating a Company Website for more details.
  • Create and evaluate social media profiles: Establish business pages and accounts on Facebook, Yelp, Google my Business, and Twitter to post updates, news, photographs, and reviews.
  • Get favorable feedback: Online reviews may make or ruin a company. Always solicit feedback and testimonials from your customers and display them on your website (with their permission). Monitor social media reviews and reply gently to any unjustified unfavorable feedback.
  • Introduce your company to area companies such as vehicle repair shops and dealerships, as well as businesses with private parking. Join your local chamber of commerce as well as other small business organizations.
  • Advertise: Spend your marketing cash on advertisements in local newspapers, on internet forums, on radio, and on highway billboards. Print flyers and business cards and hand them out to nearby businesses.

That is not to imply that starting a tow truck business will be simple: calculating expenditures, purchasing equipment, and acquiring the necessary permissions all take time and effort. Furthermore, the day to day operation of a tow truck business poses several problems and difficult decisions. But if you are fully determined then follow our guide (How To Start A Tow Truck Business) and start a tow truck business.