Towing business is one that is regularly in demand. Every day, vehicles are left stranded, break down, or illegally parked. A tow truck will be needed to transport these vehicles to impound lots, repair shops, and other locations as directed. Some towing businesses also provide emergency roadside assistance.
That means if you are thinking of starting a towing business, you are in to flourish in a profitable industry. Therefore, in this post, we have provided you a step-by-step guide to starting a towing business and becoming successful with it. You can get a basic idea of towing business from here.
Table of Contents
Steps to Starting a Tow Truck Business
#1: Plan your business
Every successful business starts with a great idea and a solid plan to back it. That is why you need a solid business plan to serve as a guide if you want to build a successful towing business. Although writing a business plan may not be a task you will be happy to do, it is an important step you must not skip.
A business plan helps you get your business ideas out of your head onto a piece of paper. The plan should identify what type of towing service you will be offering and who you will be offering the service to. Are you going to be needing a team of truck drivers to run the business or you are going all on your own? Answering all these questions will help you come up with a perfect structure for your tow truck business.
Additionally, your business plan should include your budget, equipment you need, location, startup cost, branding, and marketing strategy.
#2: Identify your target market
When starting a tow truck business, you need to know exactly who your business will be serving. That is your target market. When many people think of a towing business, they usually think only about roadside assistance in case they run into car troubles on the road. However, there is a wide range of services a towing business can render. Some of them include:
- Towing impounded vehicles
- Roadside assistance
- Towing Service for the city
- Law enforcement
- Auto repair shops
- Auction houses
That means in your tow truck company, you might be receiving calls from such police departments, individuals, some other municipal departments, motor clubs, repair shops, property owners, and many more.
#3: Register your towing business
Before you can open your doors for business, you will need to complete some important paperwork. Register your towing business with your local and state agencies. To do that, you will need to do the following:
- Choose a business entity
Your type of business entity will determine how your taxes will be filed, as well as how much risk you will be exposed to in your business. Some common entities to choose from are sole proprietorship where you run the business alone and your personal and business taxes filled together. This type of entity also requires the least paperwork but bears the most risk exposure.
You can also decide to choose a limited liability company (LLC) where you run the business as an individual or with multiple business partners. This provides more protection than a sole proprietorship. However, if you desire to grow your business to a nationwide level, for example, you will need to operate your business as a corporate entity. This provides the most security but involves more paperwork.
- Secure a unique business name
Ensure your intended business name is not already registered by someone else. Confirm that with your secretary of state’s office.
- Register for an Employer Identification Number (EIN)
You will need an EIN if you plan to hire more drivers in the future to expand your tow truck business. It will also be needed when filing your business taxes and when applying for funding. You can register for your EIN online with the IRS.
#4: Get your funding right
The next thing is to secure your startup funding. You will enough capital to start this type of business because the truck and other equipment are usually costly. To get the funding for your towing business, you can either look into your personal saving if it is fat enough or talk to family and friends or crowdfunding to raise some money for you to start on good ground.
Another means of funding your business is to apply for a business loan. This you can get from your local banks, online lenders, or SBA microloans for new entrepreneurs. You can also explore commercial truck financing to get loans for your equipment financing.
#5: Obtain licenses, permits, and insurance
To run your towing business, you will need to obtain some licenses and permits. So check with your state’s department of transportation to know which permits and licenses you will need. However, these are some general ones you might need:
- Indictment management permit
- Consent tow permit
- Private property permit
- Oversized vehicle permit
- Class B driver’s licenses
Some insurance policies you may need to safely operate your business without running into loss in case of an unfortunate accident are:
- Physical damage insurance
- Auto-liability insurance
- Comprehensive coverage
- Uninsured motorist insurance
- On-hook coverage
#6: Secure yard
Sometimes, a towing company may hold vehicles for different reasons. Therefore, you will need to have a secured parking lot capable of holding cars for days or even weeks.
#7: Purchase the right equipment
This is probably the most critical investment you will be doing for your towing business. A new tow truck can run up to $100,000 or more when you want to purchase one. But if you don’t have enough money to get a new truck now, you can go for a used tow truck without sacrificing performance.
#8: Hire more employees for your towing business
Growth will definitely mean more requests for your services. To keep up with this demand, you will need to hire employees and buy more tow trucks. You can also consider creating a central dispatch office where all calls will be directed to and truck drivers coordinated to execute the job.
However, when hiring more drivers and employees, don’t forget the place of training them. Train your call representatives to improve customer relation abilities. A fast, responsive, and unbeatable customer service will help build your brand and set you out among your competitors.
Bonus Tips: You can also read more business ideas like Motorcycle Business, Logistics Company and many more ideas on How to Start a Business.