How to Start a Towing Company

Tips for Getting Started in the Towing Industry

Starting a towing company is a great option for the mechanically inclined entrepreneur. It’s an industry in which success is scalable; you can easily add trucks to your fleet to increase revenue. Not to mention, demand for towing companies is recession-proof. In any economic climate, a car that does not move will need a tow. This is a nice component to this type of business in a less than certain economic climate.

Owning a tow truck company can be a great option for someone looking to be their own boss, work with their hands, and set their own hours. Starting a business is never easy, but if you follow this advice starting your own business will be much easier.

Paperwork, Policies, and Planning

If you’re going to start towing vehicles, you’ll want to have all your paperwork in order!

You’ll need a towing license before you open for business. How you go about obtaining a towing license will depend on the area in which you will be operating. Start by researching the rules and regulations surrounding towing licenses in your State; your local municipality will be able to point you in the right direction. The number of towing licenses available to businesses are often regulated. If there aren’t any new licenses being issued for your desired area of operations, you may be able to purchase a license from someone looking to sell an existing one.

Not anyone can get behind the wheel. To operate a tow truck, the driver generally must have a class B driver’s license. This will likely require a trip to your local Department of Motor Vehicles.

Get your business insured. A towing company has fiduciary responsibility over the car it is towing. This means your towing company is liable for any damages. Sometimes, the car being towed is worth more than the truck that’s towing it. It’s critical that insurance policies for towing companies are covering the company before picking up your first tow. Stay current on your premiums, a lapse in coverage could be costly.

Contact the IRS and your state revenue office to register your business. Once registered, you will receive an Employer Identification Number. This takes the place of a social security number when completing official documents and will also be used when filing taxes for your business.

Lifts and Leases

You are going to need a truck to move all your customer’s cars. You will have to decide between a flatbed or a wheel-lift tow truck. A flatbed truck is going to be initially more expensive than a wheel-lift, but it also provides more opportunity. Most emergency roadside assistance calls are serviced by flatbeds. Depending on your business plan and future goals, the initial investment in a flatbed over a wheel lift may be a worthy investment.

Not all towing companies operate with flatbeds, however, and starting your business with a wheel-lift may be the best decision for you. Since wheel-lifts are less expensive than flatbeds, they are also a great option when expanding your business. With minimal additional capital, you can quickly double or triple your fleet, begin hiring drivers, and managing your clientele from the office.

It’s also important to consider your business plan, your goals, and the future when choosing your location. The shop’s lot needs to be strategically placed. A successful towing company is one that can service customers quickly; set up shop close to the cars you plan on towing. It’s also important to have enough space. Choose a location that is large enough for the company’s needs. With success, you will quickly fill up the lot, so it’s important to choose a location that provides your new business with room to grow. Finding a good location isn’t easy, lease negotiations can be difficult, relocation is expensive. It’s not uncommon to see a towing company’s lot overflowing with cars, the lot manager creatively cramming more cars into limited space. A lot of headaches could have been avoided if those owners had better planned before signing their lease.

Along with obtaining the towing license, purchasing your truck(s) and signing your lease are the biggest capital investments made when starting a towing company. Do not rush these decisions because they will be the cornerstone of your company’s future success.

Solidifying your Business Plan

Choosing what services your towing company will offer helps inform your decision-making when signing your lease and building your fleet. Will you be pursuing emergency assistance clientele; removing cars from the scene of an accident? If so, you’ll need a flatbed. Will you be delivering fuel to cars that have run out of gas? Will you be contracting with a service provider like AAA or will you be partnering with local garages to increase revenue?

The answers to many of these questions will be found through analysis of the market. Do some research into competitor towing service companies in your area. Find out what they are doing well and where they are lacking. This will point you towards opportunity in the market. Will you beat out the other shops on price? Will you be providing superior service? Develop a business plan that differentiates your towing company from the competition.

While towing is an industry that has proven the test of time, it is important to remember that you are operating in the 21^st century. Make sure that you have a website! Your website should include all services and pricing, contact information, and the address of your lot. Most of your customers will be viewing your website through their phones. Ensure that your site it mobile phone optimized. Consider search engine optimization to ensure that your company is amongst the first seen by any potential customers searching for a tow in your area. Create Facebook and Instagram pages for your new company. Posting to social media accounts on the behalf of your business will make customers feel like you are a part of the community, increasing referral rates. It also allows customers to post about your successful tows and link back to your page.

With financing rates low, it may be the right time for you to start your own business. If you are strategic, take your time, and get your paper work together, you too can start your own towing company.