How To Start A Tow Truck Business
Starting a Tow truck business is always a reliable and profitable occupation in the automobile industry. The report shows the truck towing business is worth $11.3 billion in the USA and rapidly grows by 2.9% annually. There is always a steady demand for Road Rescue Towing services. Over time, people are more aware of roadside assistance.
But how to start a tow truck business from scratch? Vital considerations should be noted. First, there are different types of towing services available in the industry. For example, Post-accident clean-up, vehicle transport for long distances, heavy-duty towing, etc. So, specifying your niche before starting a towing company is vital.
Similarly, you should make a business plan, collect vital documents like tow driver ID, register your business, and follow other vital steps. So this guide explains how you can start a tow truck business following 10 simple steps. Besides, we discuss what you need for the services and other related information.
Why should I start a Tow truck business?
The tow truck business always has a constant demand in the USA. The job is not very stressful, it is quite enjoyable because the driver meets new people daily. The tow truck business mainly focuses on relieving drivers from stressful situations on the roads. Interestingly, anyone can offer towing services until they have excellent driver skills and clear records. Below are the benefits you can expect by starting a tow truck business.
High demand and profit
With the tow truck business, you become confident in getting customers due to its constant demand. People often search for roadside rescue professionals in emergency and non-emergency situations. Besides, running a tow truck business is low, which gives owners up to 90% net profit. So you can easily grow your business by managing the expenses.
Flexibility
Another benefit of a tow truck business is flexibility. Owners can offer services anywhere until they have a towing truck. Besides, you can set your own time or hours to work.
Highly scalable
Over time, you can expand your towing service by owning more trucks. You can add new services, features, and pricing to reach your region’s wide range of customers.
Be your boss
Owning a towing company gives you freedom by taking all operations into your hands. No boss makes decisions for your business.
What are the different types of Towing Company?
Towing companies mainly work to transport broken or type of vehicles to a workshop or decided destination. You can select a specific truck towing service according to your needs. Below are the different types of towing companies’ services.
Light duty towing
Some towing companies focus on transporting light-duty vehicles like vans, SUVs, small cars, etc. They have been called to tow cars that broke, damaged, collided, or illegally parked in restricted areas.
Medium duty towing
Mid-duty towing businesses are called to transport medium-sized cars like trucks, buses, and RVs that damage or break in roadside collisions.
Heavy duty towing
These businesses focus on transporting heavy-duty vehicles like semi-trucks and trailers that need towing for accidents.
Repossession towing
Some towing companies work with lenders or financial institutions who demand repossessing vehicles.
Specialty towing
Lastly comes a specialty towing business that tows specific vehicles from different spots like sports cars, motorbikes, boats, etc.
What do I need to start a tow truck business?
First, you need a tow driver ID to start a tow truck business from scratch. Besides, the rules and regulations can vary depending on your US state. You can take advice from the other two business owners for the process. Still, the following things are compulsory for a towing company.
A tow truck
You need a truck to offer towing services in your region. You can buy a new vehicle or rent it initially. Most importantly, your truck should tow specific vehicles that you prefer to service.
Equipments
Besides trucks, you should also need equipment to offer towing services. The most common are towing chains, dollies, Hitch Hooks, Anchors etc. you should invest a minimum amount to buy this towing equipment.
License and Permits
Another vital thing you need is a license and permits for your towing company. Documents rules and regulations depend on statewide. So you should research well to gather all vital permits for your business.
Insurance
It is important to have an insurance plan for your tow truck business. This coverage helps to recover losses from accidents or damage during your on-road services.
Finally, you need a potent business plan to start and grow a tow truck company. Below, we discuss more about the topic.
How to start a tow truck business: 10 easy steps
Tow truck business is a demandable and profitable profession that won’t be affected by the recession. But it is important to prepare yourself before diving into the industry. There are a lot of steps to start and grow in this business.
Select your towing service
Before jumping into the business, determine which towing service you are willing to provide. A tow truck business is mainly divided into two categories: consensual towing and non-consensual towing.
Consensual towing companies reach direct customers who need roadside assistance and transporting their damaged vehicles. On the other hand, non-consensual towing companies work with private authorities and law enforcement to tow illegally placed vehicles.
Now, both towing services have their challenges. For example, Getting a fair price is difficult in Consensual towing. On the other hand, most non-consensual towing companies hustle in court due to the sudden pickup of owners’ cars.
Prepare a business plan
Every successful business starts with a potent plan and strategy. You should have goals and dig down to the step-by-step process that you follow in your towing service journey. After selecting your service niche, decide whether you tow by yourself or make a team of drivers.
Always prepare an outline to divide your expenses on trucks, equipment, insurance, and other items. Next, choose a perfect location to offer your on-road assistance if you plan to offer non-consensual towing services. Perform In-depth research to find genuine companies. Similarly, you should collect all legal permits and licenses needed in the towing business.
Register your company
Before opening the door of your towing business, it is vital to complete some paperwork. You should register your company to make it a legal entity with state and legal authorities. It helps to manage your business taxes and reduce risk factors legally.
Register your business as a limited liability company (LLC) or corporation. LLC companies form with single owners or several business partners. By registering in this legal entity, you get some personal liability protection. Register for a corporation if you have big goals to nationalize your towing company.
Besides, there are other paperwork like liability insurance and business insurance. That’s why consulting with a lawyer is recommended to determine the structure of your contractors and liability protection.
Collect license and permits
Opening a new company requires lots of paperwork, so business registration needs to be improved. Various licenses and permits are needed according to your state law and regulation. Visit your state’s Department of Transportation and understand specific requirements for your business. Still, the following are the licenses and permits mostly required for a towing company.
- Indictment management permit
- Private property license
- Consent to permit
- Non-consensual towing permit
- Vehicle tow and storage permit
- Towing and recovery license
- Oversized vehicle permit
- Overweight vehicle permit
- Class B driver’s licenses
Open a bank account and register to EIN
After registration of your company, apply for an employer identification number (EIN). This essential tax identification number allows you to open a business bank account. Ask for a debit card that you used to cover all business expenses, including trucks, equipment, gasoline, etc.
This EIN registration and business account help to separate your tax report and personal finances. Besides, you can also build business credit that is later used to apply for types of credit cards.
Buy a new truck
Next, you should buy a new tow truck, a major investment for your towing business. Depending on your truck model, the price ranges between $65,000 and $115,000. If you need more cash, apply for a business loan with your account.
Now, selecting the best type of towing truck is important to determine your services. Wrong towing vehicles won’t transport cars you are willing to service. For example, regular-size tow trucks have trouble transporting oversized load vehicles. Below are the specific types of towing cars for different transportation services.
- Flatbed tow trucks transport various cars, trucks, SUVs, and motorcycles.
- Wheel lift tow trucks tow standard-size vehicles that are damaged.
- Hook and chain tow trucks can be used to tow heavy-duty cars.
- Integrated tow trucks are versatile and can be used in various modes of transport.
- Heavy-duty tow trucks tow construction equipment, commercial cars, and buses.
Specify your target audience
After completing all legal procedures, it’s time to specify your target audience. Companies mainly focus on two types of services: B2B and B2C. B2B-focused towing companies serve agencies or businesses transporting illegally parked vehicles or heavy-duty items. On the other hand, B2B means business to customer service.
Determining the audience helps to create a more specific route plan for your towing company.
So, what will be your target audience? If it is business to business. Ensure whether they should be large agencies, local garages, or retail shops. If your selected company transports heavy-duty construction equipment or homes, your target audience will be builders and contractors.
If your focus is to serve directly to customers, reach directly to hustling people who need roadside assistance.
Build your brand
After determining your target audience, it’s time to reach those customers. Here comes building your brand. It is vital to keep the brand easily noticeable to your target audience. In this case, you can optimize the brand logo, name, color palette, business cards, and professional marketing material.
The main goal is to create a brand that always comes first when someone needs towing truck service. You should optimize the logo and name to make it easy to connect with consumers.
Promote your services
Now comes your towing company’s promotion. Here, you can market your service both offline and online. Below are some potent online marketing strategies for your tow truck business.
First, create a new website with all your services, experience, relevant permits, and licenses. Set up an easy-to-navigate booking page that directs your customer to your service team. Besides, you should optimize the website search engine to reach customers when they search for tow truck service.
Secondly, create social media pages for your towing company. Set up different Facebook, youtube, Reddit, Instagram, and other pages to reach a more targeted audience.
You can also hire online marketing experts to promote your services and drive more customers to your company.
Prove your service quality
Reliability and trust are vital parts of the tow truck business. Indeed, this is a time-sensitive job, meaning clients always need emergency vehicle transport. When working with local businesses or authorities, consistency is key to building trust. You should always prepare to drive and tow the desired vehicle of your clients.
If you serve directly to customers, take their reviews and post them on your social media pages. It helps to engage with more audiences and prove your service quality better.
Faqs
Below are the most asked questions related to the topic. Drop down to get your quick answers.
What license do I need to start a towing company?
Various types of licenses and permits are required to start a towing company. The most common is a commercial driver’s license (CDL), a business license for your LLC, A towing license etc.
What is the profit margin for a towing company?
According to the industry data, the average profit margin of a towing company is 10% to 15%. However, individual business owners may witness different profits according to their circumstances.
How much does it cost to start a tow truck business?
On average, owners spend between $150,000 to over $1 million when starting a tow truck company from scratch. These investments can vary depending on your initial towing equipment.
Conclusion:
So, above is a detailed guide about How to start a tow truck business. We hope you get a clear answer to your query. Remember, starting a towing company needs lots of preparation, business plans, and initial investment. Besides, there are several permits and licenses which you need to collect from local authorities. It is recommended to consult with a lawyer to determine vital documents for your towing truck service. If you are determined to start a tow truck business, keep hustling and follow our recommended route plan strategically.