Are you interested in starting a towing and recovery business from home? If YES, here is a complete guide to starting a tow truck business with NO money and no experience.
Okay, so we have provided you an in-depth sample tow truck business plan template. We also took it further by analyzing and drafting a sample tow truck service marketing plan backed up by actionable guerrilla marketing ideas for tow truck businesses. In this article, we will be considering all the requirements for starting a tow truck business. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- 1 How Does a Towing Van Business Work?
- 2 Starting a Tow Truck Business – Market Research and Feasibility Studies
- 3 Starting a Tow Truck Business – Legal Matters
- 4 Writing a Business Plan for a Tow Truck Company
- 5 Starting a Tow Truck Business – Technical & Manpower Details
- 6 Starting a Tow Truck Business – The Marketing Plan
- 7 Tips for Running a Tow Truck Business Successfully
How Does a Towing Van Business Work?
Towing is coupling two or more objects together so that they may be pulled by a designated power source or sources. The towing source may be a motorized land vehicle, vessel, animal, or human, the load anything that can be pulled. These may be joined by a chain, rope, bar, hitch, three-point, fifth wheel, coupling, drawbar, integrated platform, or other means of keeping the objects together while in motion.
Towing may be as simple as a tractor pulling a tree stump. The most familiar form is the transport of disabled or otherwise indisposed vehicles by a tow truck or “wrecker.” Other familiar forms are the tractor-trailer combination, and cargo or leisure vehicles coupled via ball or pintle and gudgeon trailer-hitches to smaller trucks and cars. In the opposite extreme are extremely heavy duty tank recovery vehicles, and enormous ballast tractors involved in heavy hauling towing loads stretching into the millions of pounds.
Necessarily, government and industry standards have been developed for carriers, lighting, and coupling to ensure safety and interoperability of towing equipment. Historically, barges were hauled along rivers or canals using tow ropes drawn by men or draught animals walking along towpaths on the banks. Today, tug boats are used to manoeuvre larger vessels and barges. Over thousands of years the maritime industry has refined towing to a science.
This industry is a very technical one and there has to be a rich level of knowledge to do well here. If you want to start a towing business, this article will help.
Starting a Tow Truck Business – A Complete Guide
- Towing Industry Overview
Over the five years to 2015, revenue for the Automobile Towing industry has grown, due to improving economic conditions, particularly at the consumer level. In addition, the average age of vehicles on the road increased, resulting in more repairs and towing services.
- Interesting Statistics About the Tow Truck Industry
In the five years to 2020, revenue for the industry is expected to trend higher. As the economy continues to rebound, disposable income rises and more people go back to work, roads will become more crowded. The more cars on the road, the more likely towing companies will attend to vehicle issues. The Automobile Towing industry has a medium level of capital intensity. Industry operators spend about $0.16 on capital for every dollar spent on labour.
Efficient communications equipment, newer vehicles, computer-assisted booking and route-planning facilities can reduce the need for labour. However, many labour functions in the industry, such as driving and maintenance, cannot be made less labour intensive. Over the longer term, capital investment within the industry will likely grow as competition becomes more intense.
According to the business statistics website IBIS World, the towing business in the U.S. generated $4.87 billion in revenues in 2010, with the majority coming from car and light truck towing. This represents a growth of 3 percent over 2009 with revenue of $6 Billion and an annual growth of 1.1% it can only get better for the industry.
Starting a Tow Truck Business – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who need the services of towing companies cuts across the public sector, the organized private sector, households, communities and people of different class and from all walks of life.
Below is a list of the people and organizations that need the services of towing companies;
- The public sector (public facilities et al)
- Organized private sector (Corporate organizations)
- Businessmen and Businesswomen
- University Campuses and Schools
- Event Planners
- Estates and Communities
- Religious Centres
- Sport Organizations
List of Niche ideas Within the Tow Truck Business That You Can Specialize in
When it comes to starting a TOWING company, there are a couple of niche ideas within the industry that an entrepreneur can choose from. Aside from the existing niches in the towing industry, an entrepreneur who is creative can carve a niche for himself / herself.
Here are some niches / areas that a private security company can be specialized in;
- Towing of private owned cars
- Towing of cars for government agencies
- Towing of trailers etc.
The Level of Competition in the Tow Truck Industry
Surviving in the business world as a towing company requires more than, your expertise, knowing how to deliver standard contracts but also how to network with key people that matters; decision makers that can decide who a towing contract is giving to and all that.
The fact is that, there are always big time investors in the industry, but one thing is certain, there is room big enough to accommodate both the big companies and the small smaller companies. What smaller towing companies need to do to survive in the industry is to concentrate on providing towing services to households, event planners, estates, communities, schools, hospitals and hotels et al before bidding for big contracts from corporations and government agencies.
List of Well – Known Brands in the Tow Truck Industry
There is hardly any industry in the world that do not have the big brands that have really made their mark in it; the towing business industry is also not an exception
Here are some of the leading towing companies in the United States of America;
- Miller industries towing Inc.
- American Towman
- Tow zone trailers and equipment etc.
Starting a towing company is not as easy as it seems; it is indeed a serious business hence critical economic analysis must be conducted to ensure that the risks and other threats associated with starting a business from the scratch or investing in a business idea are mitigated.
If you are considering starting a towing company in the United States, your concern should not be restricted to just acquiring an office facility and equipping the facility or hiring the best hands in the industry, you should also be concerned on how to attract clients and secure mouth-watering towing contracts.
On the average, setting up and running a towing business in the United States can be cost effective simply because you don’t have to maintain a large workforce when you don’t have a towing contract to execute. With key good company’s profile, highly trained, highly qualified and highly experienced staff members in your team, you won’t have to struggle much to win towing contracts when you submit your bids.
Is the Tow Truck Business Worth Starting from Scratch or is Buying a Franchise Better?
Although there is the possibility of buying a franchise from a successful towing company or even partnering with a big towing company if you are considering owning an investment in the towing industry.
One thing is certain, people are motivated to start a business based on various factors and incentives. If you are looking towards building a business that you intend controlling, a business brand that you hope to one day transfer ownership to your children and perhaps also sell franchise in future, then starting from the scratch should be your best bet. But if you only interested in making money and multiplying your wealth, then you may as well buy the franchise of a successful towing company that is willing to sell its franchise.
Possible threats and challenges you will face when starting the business
Generally in the towing industry, both the already established ones and start – up towing companies are subject to threat and challenges from government policies, global economic downturn which usually affects spending and unforeseen natural disasters (disasters that may cause setback).
Another threat that you are likely going to face when you start your own towing company is the arrival of a well – established towing company in the location where your business has strong presence.
Starting a Tow Truck Business – Legal Matters
- Best legal entity to use for a tow truck business
No doubt starting a towing company is indeed a serious business which is why the legal entity you choose will go a long way to determine how big the business to can grow. Choosing a legal entity for a business such as a towing company is some worth straightforward especially if you decided to grow the business big.
When it comes to choosing a legal entity for your towing company you have the option of choosing from a general partnership, a limited partnership, an LLC, a “C” corporation, or a “S” corporation. It is important to clearly state that these different forms of legal structure for business has its own advantages and disadvantages; which is why you must weigh your options properly before making your choice on the legal structure to build your private towing outfit on.
These are some of the factors you should consider before choosing a legal entity for your towing company; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and tax issues. If you take your time to critically study the various legal entities to use for your towing company, then you will agree that limited liability company; an LLC is the most suitable. You can start your private security company as a limited liability company (LLC) and in future convert it to a ‘C’ corporation or even a ‘S’ corporations especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will afford you the opportunity to grow your towing company so as to compete with major players in the towing industry; you will be able to generate capital from venture capital firms, stock market, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures as well
Catchy Business Name ideas Suitable for a Tow Truck Business
When it comes to choosing a name for your towing company, there are no hard and fast rules to follow. This is so because towing companies are not like other business who hopes that their names can help them attract passers-by who may just walk in to want to do business with them; there is no rule of thumb.
Here are some catchy business name ideas you can choose for your towing company;
- Alexandrarole Towing Inc.
- Get right towing company
- At your service towing company inc. etc.
The Best Insurance Needed for a Tow Truck Business
In the United States and of course in most countries of the world, you can’t operate a business without having some of the basic insurance policies that is required by the industry you want to operate from. Besides, the nature of the towing industry requires that you have the proper insurance cover in place or else you will be forced out of business if anything goes wrong with the towing contract you are handling.
So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best insurance policies for your towing company; it is their duty to help you assess the risks involved in the type of security business you intend running and then advice you accordingly.
Here are some of the basic insurance covers that you should consider purchasing if you want to start your own towing company in the United States of America;
- General insurance
- Health insurance
- Risk Insurance
- Payment protection insurance
- Liability insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
Intellectual Property Protection and Trademark
Actually, the towing industry is not that which really requires the intellectual property protection due to its nature. But if you are considering starting your own towing company, then you should consider filing for intellectual property protection. Filing for intellectual property protection for a towing company goes beyond protecting your company’s logo and other documents, but also protecting your software applications and of course the name of your company.
Is Professional Certification Needed to Start a Tow Truck Business?
The towing industry is one of the industries that is highly regulated so as to prevent costly mistakes that can cause chaos in the country. It is for this reason that if you are looking towards beginning a towing company, then you should acquire the necessary certifications; it will give you edge amongst your competitors. The truth is that, the more relevant towing certifications that you and your team have, the easier it is for you to convince people to patronize your services.
The major professional certification you might consider having especially in the United States of America is the North American Towing Academy for training and certifications. Other certifications may apply which usually differs based on countries.
List of Legal Documents You Need to Run a Tow Truck Business
In The United States of America and of course all over the world, the towing industry is a critical and important one. If you are considering starting a towing company, then you are expected to meet the legal documents requirements as stipulated in the constitution of your country.
These are some of the basic legal document that you are expected to have in place if you want to start a towing company in the United States of America;
- Certificate of Incorporation
- Security Clearance Certificate
- Business License
- Business Plan
- Non – disclosure Agreement
- Memorandum of Understanding (MoU)
- Employment Agreement (offer letters)
- Operating Agreement
- Company Bylaws
- Operating Agreement for LLCs
- Insurance Policy
Writing a Business Plan for a Tow Truck Company
If you are looking towards starting a towing company, then one of the first steps that you are expected to take is to consult experts to help you write a good and workable business plan. The truth is that, in order to successfully run a towing company, you would need to have a good business plan in place.
A Business plan is the blue print that is needed to successfully run a business; with a workable business plan in place, you will reduce the trial and error approach of doing business. You will be able to manage your business with purpose and perhaps precisions; you will know what to do per time and how to handle challenges, growth and expansion.
So if you want to start your own towing company, you are required to write a detailed business plan that can pass reality test when subjected to it; you should work with the facts, figures and other indices in the towing industry as it applies to the country you intend starting the business.
The whole idea of writing a business plan is not just for the sake of having a business document in place; but a detail guide on how to effectively run your business from the scratch. Your business plan should outline and cover strategies on how you intend to manage and grow your private security company.
The rule of thumb in writing a business plan is to try as much as possible to be realistic and never to over project when putting figures on income and profits et al. As a matter of fact, it is safer to underestimate when writing a business plan so that you won’t be so disappointed when reality sets in.
Detailed Cost Analysis for Starting a Towing Company
There are several expenses that you would have to make before successfully launching your own towing company. It is important to state that the location you choose to launch your business will definitely impact on the overall cost of starting the business which is why it is very important to have concluded and analysed your feasibility studies and market survey before drawing up a budget and sourcing for funding for your business.
Here are some of the basic cost you must look towards fulfilling when starting a towing company in the United States of America;
- The Total Fee for incorporating the Business in United States of America – $750.
- The budget for Insurance, permits and license – $5,000
- The Amount needed to rent a suitable office facility with enough space in the United States of America (Re – Construction of the facility inclusive) – $50,000.
- The Cost for equipping the office (computers, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – $5,000
- The cost for acquiring towing gadgets, uniforms et al etc. – $50,000
- The Cost of Launching an official Website – $700
- Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – $2,500
- Other miscellaneous – $1,000
Going by the report from our research and feasibility studies, we will need about $120,000 to set up a small scale towing company in the United States of America.
On the average, you would need over 200,000 US dollars to start a medium scale towing company in the United States of America. If you choose to start a large scale towing company, then you should look towards budgeting about 2 million US dollars and above. This money include paying experts that will be on your employee / payroll.
- Financing Your Towing Company
If you choose to start your towing company on a small scale, you might not need loads of resources to launch the business, but if you decide to start on a large scale, you will sure need to raise the required start – up capital to launch the business.
If you are starting your towing company on a large scale, you will need a decent office facility, office equipment and furniture, and money budgeted for the payment of salaries and utility bills for at least a period of 3 months and you will also need money to purchase essential vans, towing trucks etc. In essence you are expected to generate your start – up capital.
When it comes to financing a business, one of the first thing and perhaps the major factors that you should consider is to write a good business plan. If you have a good and workable business plan in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for start – up capital for your towing company;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Applying for loan from your bank / banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends
Choosing a Location for Your Towing Company
Choosing a location for your business is not what you should do without due consultation. The truth is that if you get it wrong with the location where you have decided to pitch your business tent, you are more likely going to struggle to make headway with the business. One of the major reasons why businesses struggle, fail and eventual close shop is the fact that the owners decided to choose a wrong location for the business.
Thus as a person who is just starting out; especially if you are a newbie in the towing industry, it is important that you locate your business in an area with healthy business activities. In fact a busy area should be mostly considered for this purpose
These are some of the factors that you should consider before choosing a location for your towing outfit;
- The demography of the location
- Accessibility of the location
- The numbers of private security companies in the location
- The local laws and regulations in the community / state
- Traffic, parking and security et al
Starting a Tow Truck Business – Technical & Manpower Details
If you are tinkering with starting a towing business, then you should be ready to purchase effective towing gadgets and accessories – these are some of the basic technical areas you are expected to spend part of your start-up capital.
When it comes to choosing between renting and leasing an office space, the size of the towing firm you want to build, and your entire budget for the business should influence your choice. If you have enough capital to run a towing outfit, then you should consider the option of leasing a facility for your office; when you lease, you will be able to work with long – term planning.
Regarding the number of employees that you are expected to kick start the business with, you should consider your financial capacity before making the decision. But good enough, you don’t have to maintain a large workforce if you run a towing company; you can recruit and train employees when you have the need to. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Business Development Executive / marketing Executive, Customer Service Officer or Front Desk Officer, and Accountant.
Over and above, you need a minimum of 10 key staff to effectively run a medium scale towing company. Please note that there will be times when you are expected to go out of your way to hire experts to help you handle some high profile towing contracts. If you are just starting out you may not have the financial capacity or required business structure to retain all the professionals that are expected to work with you which is why you should make plans to partner with other towing outfits that are specialized in areas you aren’t.
The Services Process Involved in the Towing Industry
The services process involved in the towing industry depends on the niches of security services a company is into. On the average, the process starts with biding or submitting proposal for a towing contract, once the contract is won, then it is expected for the entire contract document to be signed and advance payment made as required.
Once the payment has been sorted out, then the security firm is expected to deploy towing trucks, and vans for immediate response and necessary actions. Over and above, it is the practice for towing companies to first access the risk involved and the nature of job they are to do before billing the organization that requested for their services.
Starting a Tow Truck Business – The Marketing Plan
- Marketing Ideas and Strategies for a Tow Truck Business
Towing firm is not a business that you have to retail products which is why you must do all you can to maximize any opportunity that comes your way.
So when you are drafting your marketing ideas and strategies for your towing company, make sure that you create a compelling personal and company’s profile which must include the profile of your board of directors and management team. The truth is that if you have highly qualified, trustworthy and successful towing professionals in your board and core management team, it will definitely give you leverage in the market place.
Here are some of the platforms you can utilize to market your towing company;
- Advertise your business in relevant business magazines, TV and radio station and also make yourself available for auto-mobile related talk shows and interactive sessions on TV and Radios)
- List your business on local directories / yellow pages (both online and offline)
- Attend auto-mobile related expos, seminars, and business fairs et al
- Leverage on the internet to promote your business
- Join local chambers of commerce around you with the main aim of networking and marketing your towing company.
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, community leaders, schools, hospitals, hotels and government offices in your target area.
- Promptness in bidding for contracts
- Create different packages for different category of clients in order to work with their budgets.
- Engage in direct marketing, referral marketing and also email marketing.
Possible Competitive Strategies for Winning your Competitors in the Tow Truck Industry
It might be challenging competing as a newbie in the towing industry especially in a highly organized market like that of the United States of America, which is why you must be deliberate in choosing your board members and your core management team.
As a towing company, if you have the required expertise and equipment to carry out a contract, then you are likely not going to struggle to compete in the industry. Hence, ensure that you put in your best whenever you have the opportunity to handle any contract. You should be known for delivering excellent towing services at all times. Creativity, excellence and attention to minute details should be our signature.
Lastly, ensure that your organization is well positioned and if possible form strategic partnership with other key stakeholders in the towing industry; it will sure give you competitive advantage over your competitions.
Possible Ways to Increase Client Retention for a Tow Truck Business
When it comes to business no matter the industry you choose to pitch your tent in, one of the easiest ways to increase customers’ retention and perhaps to attract new customers is to satisfy your customers always. If your customers are satisfied with your services delivery, they can hardly source for alternative service provider or products.
Statistics has it that one of the major reasons why customer’s source for alternative service provider or product is when there is a drop in quality. Another reason is poor customer service. If you can continue to improve on the quality or your services and your customer service delivery, then you won’t struggle to maintain your loyal customers.
Part of what you need to do to achieve this is to track progress, results or outputs with the aim of improving on them quickly as the case demands. When it comes to managing your customers and building loyal clientele base, you should purchase a customized CRM software. With a customized CRM system you can easily stay in touch with your clients (you can carry out quick survey, you can introduce new products and prices to them without any hitch, you can felicitate with them on their birthdays and other anniversaries, you can keep track of their progress, you can send bulk text messages and customized e – mails and above all you can easily receive compliant and feedback from them).
Strategies to Boost your Brand Awareness and Create a Corporate identity
When it comes to creating brand identity for a towing business, the calibre of clients you have worked for and the nature of towing contracts you have handled is always a major brand booster.
It is pretty important to work with your consultants to help you map out publicity and advertising strategies that will help you walk your way into the heart of your target market. First and foremost, you should ensure that your brand is visible and well communicated which is why you should make provisions to work with different class of people in the society. All your publicity materials and jingles should be done by some of the best hands in the industry.
Below are the platforms you should leverage on to boost your brand awareness and create a corporate identity for your towing company;
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, community leaders, schools, hospitals, hotels and government offices in your target area.
- Advertise your business in relevant magazines and websites
- List your business on local directories / yellow pages (both online and offline)
- Promote your business on satellite TV stations and radio stations.
- Attend auto-mobile related expos, seminars, and business fairs with the aim of creating awareness and promoting your brand
- Engage in direct email marketing
- Leverage on the internet (social media platforms and your official websites) to promote your business
- Ensures that your workers wear your branded shirts at all times during working hours and also make sure you brand all your company’s official vans, trucks and cars et al.
Do You Need a Suppliers / Distribution Network for a Tow Truck Business?
The nature of the towing industry gives room for towing companies to network amongst themselves and also network with government own towing agencies. This is so because towing of cars are not handled in isolation. It involves the co-operation of all parties that are involved for better performance.
It is important to state that there will always be room for a towing firm to form strategic alliance with one another which is why it is important to maintain a good network within the industry.
Tips for Running a Tow Truck Business Successfully
The truth is that, irrespective of the kind of business you run, your ability to get all the members of your team on same page at all times is one of the keys you need to successfully run the organization.
As the chief executive officer or president of a towing company, it is you responsibility to give direction to the business. Part of what you need to do is to ensure that you create time for office meetings; a time where challenges, feedbacks, projections and relevant issues are discussed. The meetings could be daily, once in a week, twice a week or once in a month. The bottom line is that there should be consistent meetings in your organization.
Carrying out appraisals on a regular basis and training your employees will help you run your organization effectively. Encourage your employees to pursue certifications in their various area of specializations; it will help your organization’s profile and of course it will help the individuals. You can choose to fully or partially sponsor some of the certifications.
Lastly, you should keep your doors open for suggestions from members of your team and your clients. It is very important to reward excellent performance in your organization; it will go a long way to encourage healthy competition in your organization.