Do you want to start a tow truck business and want to know the cost? If YES, here is a cost breakdown to open a tow truck business and the profit margin / ROI. A tow truck which is also known as a wrecker, a breakdown truck, a recovery vehicle, or a breakdown lorry is a truck that is used to move broken down, improperly parked, impounded, or otherwise indisposed motor vehicles away from the road so as to avoid obstruction of free flow of traffic.
Companies in the Automobile Towing industry are responsible for towing light or heavy motor vehicles over short and long distances. As a way of earning additional income and improving revenue, players in this industry may also provide incidental services such as storage and emergency road repair services et al.
Starting and operating a towing truck business can be financially tasking and challenging, but the truth is that it can be rewarding at the same time. One good thing about the industry is that it is open for both big-time investors who have the capacity to start the business with a fleet of tow trucks and aspiring entrepreneurs who may want to start with just one tow truck.
The Estimated Cost Breakdown to Start a Tow Truck Business
When it comes to starting a standard tow truck business, one is expected to spend the bulk of the startup capital on the purchase of standard tow trucks. Please note that most towing equipment are customized to suit the needs and convenience of the end user, and the choices that you make will influence the tow truck cost.
Depending on the options you choose, the cost of a typical tow truck can be anywhere between $58,000 and $850,000. Aside from that, you are not expected to spend much except for maintenance and fueling and of course, paying your employees and utility bills. These are the key areas where you are expected to spend your startup capital on;
- The total fee for registering a business in the united states of America – $150
- Legal expenses for obtaining licenses and permits as well as the accounting services (software, P.O.S machines, and other software) – $3,300.
- Marketing promotion expenses for the grand launching of the tow truck in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of – $3,580.
- The cost for hiring a Business Consultant (it includes writing business plans) – $2,500.
- Insurance (general liability, workers’ compensation, and auto insurance) coverage at a total premium – $15,000.
- The cost for payment of rent for 12 months at $1.76 per square foot in the total amount of – $105,600.
- The cost for parking yard/facility remodeling – $25,000.
- Other start-up expenses including stationery ($500) and phone and utility deposits ($2,500) – $3,000
- Operational cost for the first 3 months (salaries of employees, fueling and maintenance of the truck, and payments of bills et al) – $120,000
- The cost for office / store equipment (cash register, security, ventilation, signage) – $750
- The cost of purchase of two 50 tons tow trucks (fairly used) – $450,000
- The cost of launching a website – $600
- Miscellaneous – $10,000
From the rough estimate as listed above, you would need a minimum of seven hundred and forty – three thousand five hundred and eighty USD ($743,580) to start a medium–scale but standard tow truck business in any city in the United States of America.
Please note that this amount includes the salaries of all the staff for the first three months of operation and excluding having an in-house servicing and maintenance team under your payroll. You can always contract this aspect of the business to a third-party service provider.
Conclusion
Please note that this is a rough estimate and we usually advise our readers who are interested in starting a tow truck business to go to the market or directly contact tow truck, major dealers, in their city in order to get the real time prices of the types of tow trucks they want to buy, the required insurance and perhaps payment modalities et al.
The truth is that if you are a good bargainer, you can get a better deal that will help you beat down the estimated price as listed above.