How to Start a Tow Truck Business: A Guide for DIY Beginners

Why Start a Towing Business?

Starting a tow truck business is a stress-free job as you only get to work when someone calls for help. You may not get bored of driving if you are already in the automobile industry. This is a kind of job where you mostly find yourself helping others and that itself is satisfactory work.

Here are some benefits of a towing business that you might want to know before we move on to how to start a tow truck business.

1. Independency

Running a towing business offers independence to deliver services at your own pace. It’s you who makes business decisions because only you are a boss. You can enjoy spending time on the road and helping co-drivers.

Also, you will be solely responsible for looking after tow truck maintenance and service.

2. Business Expansion

Owning a tow truck business means you can achieve steady growth because of an increasing number of vehicles on the road. You can extend the service area where more people commute on a daily basis so that if any car owner needs an assistant, you can quickly rush to the spot. Eventually, expand your business network.

3. Higher ROI

Towing a business setup might come with higher business expenditure but it also offers a great return on investment and long-term business stability. You can get off to a great start with less resource requirements.

Essential Things to Know Before Starting a Tow Truck Business

So, you have decided to run a tow truck? Great. Let’s look at things that are essential for your business. These will help you operate a towing business without any hassle. If needed, you can seek advice from an attorney on how to start a tow truck business.

License for Driving

Driving a tow truck will require a tow driver ID along with a valid license that should be authorized by the local administrative office. Also, you should be 18 years old or above to acquire a tow truck driving license.

Maintain a Clean Driving Record

Along with the driving license, you will also need a clean driving record to avail of several government permits or achieve any training certifications. It helps the license issuing authority to understand the applicant’s driving behavior and if they are capable of driving tow trucks.

Tow Truck Permits

Tow truck operators also need a permit from the transportation department to get rid of any legal issues. You will need a Class B driver’s license to operate vehicles above 26,000 pounds. Similarly, permits for towing vehicles weighing less than 10,000 pounds.

Business Insurance

The tow truck business needs a comprehensive insurance package to secure the company’s resources from unforeseen events. It will also cover vehicles being towed by you. So, if anything happens to a towing vehicle, then also you can claim insurance.

Let us discuss how to start a tow truck company in the next section.

How to Start a Tow Truck Business

Starting a tow truck business can be easy for those who are already in the automobile industry. Here, we have shared a few steps on how to start a towing business regardless of whether you are experienced or not.

1. Write Your Business Plan

No matter what business you start, you need to put your ideas onto paper in order to ensure a successful run of your business. This solid plan can help you streamline your business operations and also plays a crucial role if you want a loan for your business. So, firstly, figure out the what type of towing services you will provide.

Secondly, determine if you need a team or will you do it by yourself. Such things should be prioritized while preparing a business plan to set up a tow truck business. Also, identify how much budget you will spend on office rent, tow truck maintenance, and buying towing essentials.

Moreover, you must zero in on your audience as far as offering towing services is concerned. Decide whether roadside assistance is for the general public, heavy-duty trucks, or city vehicles. You may even need to consider how will you market your services in the business plan.

2. Register Your Business

Next comes registering your business by compiling with law and regularities. At this stage, you might have to do paperwork in order to register your business as a sole proprietor or Limited Liability Company (LLC). In case you choose sole proprietorship, you require less paperwork than an LLC business structure.

Whereas, if you go for a Limited Liability Company (LLC), then you get personal liability protection. That’s why many tow truck businesses choose LLC. It protects them in case someone takes legal action. Also, you can discuss with a lawyer regarding liability insurance and what to do if the vehicle is damaged while being towed.

The regulations may vary depending on the tow service type, service area, and location. Forming a legal entity encourages your clients to put on trust and increase credibility.

3. Open a Bank Account and Register for EIN

Once you have a towing business registered, then apply for an EIN (employer identification number) from the IRS website before processing for a new account. This is because the bank will ask for EIN if you want to open a new account for running a tow truck business. Thereafter, ask your bank for a new account where you can carry out business transactions.

This business account can be used for different purposes like gas filling, purchasing towing tools, trucks, or whatever you require to perform towing services. This separate business account will record all your business transactions, making your tax filing process much easier.

4. Purchase a tow truck

Since you need a vehicle to offer towing services, acquiring a new tow truck is essential. This will incur a significant cost but is crucial for running your towing business. So, you must decide which type of tow truck is the best fit for the services you offer. According to your requirements, you can purchase a flatbed truck, a wheel lift tow truck, or a hook and chain tow truck.

You can choose either a new towing vehicle or a used one. A new vehicle has a longer life expectancy but comes with a higher price tag. Buying a used vehicle will slash the prices and lead to sustainable revenue. Notably, purchasing a tow truck can cost you around $50,000 to $100,000.

5. Price Your Towing Services

List out pricing for the towing services you provide. Develop a robust pricing plan to stand out from the growing competition in the towing industry. Offer a competitive price of $70 to $115 as a flat fee for towing a vehicle up to certain miles. If the vehicle needs to be towed for extra miles, you can charge the customer $2 per mile.

Some four-wheelers are required to be parked in your towing area. In such instances, you can charge a storage fee for the parked vehicle. Most towing companies also prefer the B2B model to collaborate with popular car companies. These companies assign you towing tasks whenever their clients are suffering from vehicle breakdown issues.

6. Automate Invoicing Process

Now comes the important part of your business – invoicing and billing. It is a crucial step where you need to decide on how will you create and manage invoices. Most towers are using online invoicing to issue instant invoices. Similarly, you can adopt invoicing software like Moon Invoice to automate administrative tasks like invoicing and receipt generation.

You can download a suitable towing invoice template from Moon Invoice, quickly edit the details, and send it to clients on their smartphones. It saves the time and effort needed to create a professional invoice from scratch. Once you have completed the towing service, you can share invoices in the blink of an eye and get paid faster.

With trucking invoice software, you can easily manage your invoicing activities from creating to sending it to the client. It can be the right-hand billing partner in your truck business.

7. Start marketing your business

Completing the legal formalities doesn’t mean your job is done. You need another strategy for marketing to promote your newly-opened towing service. After all, you need to make money and fulfill your towing business goals. So, engage in digital marketing where you can easily reach potential customers.

Also, rank in local SEO to garner the attention of those who are looking for towing services. You can even get a location tag on navigation platforms to improve your business visibility. This is because most car owners do a quick search on Google when they need your towing service. In short, you need marketing effort to advertise your towing service and gain a competitive edge.

How Much Does it Cost to Start a Tow Truck Business?

The starting cost for a tow truck business ranges from $60,000 to $500,000. You are responsible for incurring costs such as truck insurance, fuel charges, and drivers’ wages. The exact starting cost could vary depending on team size, location, and number of trucks. Like other businesses, the towing business also has fixed expenses and variable expenses.

Fixed expenses are basically monthly costs that you need to pay for office rent, business loans, phone bills, and advertising fees. Whereas variable expenses rely on towing services that you provide each month. Truck fuel, damages, and maintenance charges can be considered variable expenses. Such things collectively contribute to the starting cost of your towing business.

Final Words

The towing industry is expecting stable growth in the near future and coming up with a new towing business would lead to exciting rewards. However, your success lies in how you tackle customer issues, which should be highlighted in your business plan. Following these steps on how to start a tow truck business, you can start towing company right away.

Once you are off the mark, you need to handle business operations, communicate with drivers, and most importantly manage business expenses single-handedly. When it comes to managing business expenses, there is no better software than Moon Invoice.

We bet on it because Moon Invoice not only helps you track business expenses but also assists in filing tax returns. The cloud-storage invoicing software allows you to make online expense receipts and invoices with ready-to-use templates. Avail a free trial now and experience seamless expense receipt generation.

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