A Comprehensive Guide on How to Start a Tow Truck Business in 2025

The tow truck market is forecast to increase from $1.69 billion in 2025 to $2.06 billion by 2029, at a CAGR of 5.0%.

That shows the tow trucking industry is booming. 

So, if you want a recession-proof business that lets you help people in need, a tow trucking company can be your best bet.

However, you may be wondering how to start a tow truck business and operate it successfully, especially without prior experience. 

Well, you are not alone, as people on different forums are seeking guidance on launching a towing company, like this Reddit user, who asks:

I am new to the US and want to start my own towing company.

I want to know if I need any licensing, registrations and what would be a good truck to start my business as an owner-operator.

Also, let me know the investment I should be ready to put in if I want to succeed in this business.

Worry not, as we’ve brought you this step-by-step guide on how to start a towing company. 

So, let’s start.

Why Start a Towing Company: 3 Primary Benefits to Consider

A towing company may be a lucrative idea to consider as it provides the following advantages:

1. Constant revenue

No matter how market conditions fluctuate, people are sure to fall in need of towing services. Whether it is a car accident, flat tire, or breakdown, they will need a reliable towing service. This implies that launching a towing business can be a constant source of revenue.

2. High profit margins

If you provide specialized services like heavy-duty towing or long-haul towing, that’s expensive. But here’s a good thing – you can markup the prices of these services accordingly so you can ensure significant profit margins. 

Plus, if you consider offering additional services such as vehicle storage, you can get an additional source of revenue and increase profits further. 

3. Diverse client base and service offerings

A towing business provides you with a chance to connect with different types of clients. These may include: 

• Individuals seeking towing services
• Companies such as law enforcement agencies, auto clubs, or private businesses seeking towing.

Moreover, you can also diversify your services, including: 

• Tire changes 
• Jump starts 
• Vehicle lockout assistance

These help you increase your revenue and profit margins.

Now that you know the pros of a towing company, it’s time to look at the steps to start one.

Step-by-Step Guide on Starting Your Towing Business

Starting your tow truck business might seem complex, but breaking it down into clear steps makes it manageable. 

Here are the main steps:

Step 1: Conduct market research

Competitor analysis

Look at other tow truck businesses in your area and ask questions, such as: 

• What services do they offer? 
• How much do they charge? 

You can also read customer reviews to find customers’ likes, dislikes, and preferences. Accordingly, you can figure out ways to make your business stand out. 

Another aspect is analyzing the demand for towing services in your area.  There are different ways you can use to do that. Here are some key ones:

• Take Google Keyword Planner, for instance. Using it, you can analyze search volumes of different keywords related to types of services. 
• Consider checking your local Chamber of Commerce to evaluate local demographics and their towing requirements. As a thumb rule, consider the areas that have a population of at least 40,000 within a 10-mile radius. The higher the population density, the better the chances of profits are. 
• Analyze additional factors, such as accident rates, traffic congestion, and parking enforcement policies in your area.

Identify your target market and service offerings

You can choose to operate a general towing company or cater to a specific industry, often referred to as specialized towing.

Some prominent towing services include: 

1. Light-duty towing: It is the most common type and involves towing cars, SUVs, and light trucks. It’s a great starting point for newcomers to the industry.
2. Medium-duty towing: You’ll handle larger vehicles like box trucks or small buses here. It requires bigger tow trucks and more skill.
3. Heavy-duty towing: It involves towing semi-trucks, buses, and heavy machinery, which requires specialized equipment and expertise.
4. Municipal towing services: These involve working with local governments to tow illegally parked or abandoned vehicles. 
5. Emergency towing services: Emergency towing companies work 24/7, responding to accidents or breakdowns. They often partner with roadside assistance services like AAA contractors or insurance companies.
6. Roadside assistance and recovery: Alongside towing, you can offer services like jump-starts, tire changes, and lockout help. This is a good way to expand your business.
7. Auto auction towing: If you partner with auto auctions, you’ll transport vehicles for dealers and sellers. This involves moving cars for auctions or repossessions.
8. Repossession services: These involve recovering vehicles for banks or lenders. They can be profitable but may come with added legal requirements and risks.

Another aspect you can look into is whether you’ll start consensual towing, non-consensual towing, or both. 

Consensual towing is when the vehicle owner requests or approves the towing service, and includes:

• Roadside assistance for a vehicle that breaks down or gets stuck
• Accident recovery
• Vehicle transportation over long distances for purposes like relocation
• Specialty towing, such as towing RVs, classic cars, or high-end bikes

You often get these service requests directly from customers or via auto clubs, insurance companies, or car dealers who need towing on their clients’ behalf.

Non-consensual towing, as the name indicates, is when you tow a vehicle without the owner’s approval. It is often applicable in scenarios such as:

• Parking enforcement (e.g., towing vehicles parked illegally or blocking driveways).
• Law enforcement (e.g., impounding vehicles involved in crimes or accidents).
• Private property towing (e.g., contracts with private property owners, businesses, or apartment complexes to tow unauthorized vehicles from their property).

However, you may need specific permits and comply with stricter regulations for these services. Therefore, it’s always good to know your local laws before you offer them. 

Write down a tow truck business plan

Once you’ve gathered all this information, it’s time to write your towing company business plan. 

Consider it a roadmap that helps you stay focused and ensure it covers the following: 

• Company description and goals: What do you want your business to achieve?
• Market analysis: A breakdown of your target market and competition.
• Service offerings: Are you offering emergency roadside assistance, accident recovery, or roadside assistance?
• Marketing strategy: How will you attract customers?

Financial projections: How much will it cost to start? What revenue do you expect?

Step 2: Establish a legal structure and acquire licensing

Now that you’ve planned your business, it’s time to get legal. 

Choosing the legal structure

The first step is choosing your business structure. This could be:

• Sole proprietorship (the simplest form, where you run the business alone): While you don’t need a separate legal entity, you are liable for all debts and obligations.
• Partnership: When you partner with a person or two and share your business’s profits and losses, that’s a partnership. In general partnerships, all partners are equally liable for debts and obligations. However, in case there are limited partnerships, some partners have limited liability.
• Limited liability company (LLC): An LLC provides limited liability protection of a corporation and tax benefits of a partnership. As you get a separate legal entity, you are not personally liable for debts and obligations.
• Corporation: A corporation is a separate legal entity, which means owners are not liable for debts and obligations.

Business registration

Once you decide on your structure, you must register your business with your local government. This usually involves picking a business name and filling out some paperwork. This process varies by location, so contact your local Small Business Administration office for guidance.

You must get an Employer Identification Number (EIN) from the IRS. This is like a business’s Social Security number and is required if you plan to hire employees or open a business bank account. 

Acquire essential licenses

You’ll need the necessary licenses and tow truck permits. This can include:

• Towing licenses: Some states or cities require specific towing permits.
• DOT number: If you plan to operate across state lines, you might need a U.S. Department of Transportation number.
• Commercial driver’s license (CDL): If you or your tow truck drivers operate that exceed a certain weight, you must apply for it. 
• Business operating license: This is the basic business license to run your business legally.
• Parking permits: Some areas require an oversized vehicle permit or special permits to park large tow trucks.

Make sure you check local regulations so you don’t miss anything.

Step 3: Get Your business insured

Insurance is a must in the towing business. It protects you, your business, and your clients. At the very least, you’ll need:

• General liability insurance: This covers any accidents that happen on the job.
• Tow truck-specific insurance: This covers your truck and any damage that might happen while towing a vehicle.
• On-hook insurance: This covers the vehicles you’re towing in case they get damaged during transport.
• Workers compensation insurance: If you have employees, this is required to cover any injuries they might get on the job.

Look for a business insurance policy consultant who understands the tow truck industry. They can offer the right advice on the coverage at a reasonable price.

Step 4: Finances and funding

Starting a towing business requires an upfront investment. Here’s how to approach funding:

Estimate your startup and ongoing costs

Start by asking yourself, “What do you need to start a towing company?”, and list down the essentials, such as:

• Tow trucks, equipment, and towing accessories or tools
• Insurance premiums
• Licenses and tow permits
• Office supplies and marketing materials

You’ll also need to budget for monthly fixed expenses like:

• Rent: $800–$4000 (can be reduced by working from home)
• Insurance: $700–$1200 per truck
• Phones, uniforms, marketing, and loan interest

Then there are variable expenses, such as fuel, repairs and maintenance, or damages from service errors. 

Secure the right funding 

There are multiple funding options available, and you can choose from them based on which suits you most. 

• Personal savings: If you’ve been saving up, using your own money can give you full control. However, beware as it comes with a significant personal financial risk.
• Bank loans: Many banks offer small business loans if you have a solid plan and good credit. It’s often a traditional yet reliable way. 
• SBA loans: These government-backed loans come with lower interest rates, and are good if you seek relatively more flexible repayment terms.
• Equipment financing: Some lenders specialize in helping you finance tow trucks and tools. This can help you save on upfront costs. 
• Investors: When you bring investors on board, you get a financial boost. However, you need to trade off some control over ownership and decision-making for it. 
• Grants: If you are a minority, veteran, or woman, you can consider seeking grants to start a tow truck business. The best part is that you don’t need to repay them. 

Create a budget and stick to it

You’ve got your capital, great! It’s time to allocate it wisely. Here are the tips.

• Cover startup equipment and licensing costs.
• Set aside cash for monthly operations.
• Include loan repayments and staff wages. 

When you have a clear budget, you can easily avoid overspending and ensure long-term success.

Step 5. Choose the right equipment

The heart of your business is your tow trucks. The type of truck you buy depends on what kind of towing you’ll do. There are a few common types:

• Flatbed trucks are great for transporting cars that cannot be driven, such as ones with serious damage.
• Wheel-lift trucks: These are smaller and more affordable. They’re suitable for quick, light tows.
• Integrated tow trucks are for towing heavier vehicles, like buses and trucks.

Type	Description	Best Suited For
Flatbed	Car is lifted onto a flatbed platform.	Vehicles with serious damage, classic cars, or those that cannot be driven.
Wheel-lift	Front wheels are lifted onto a cradle, and the rear wheels remain on the ground.	Quick, light tows of vehicles in good driving condition.
Integrated	Combines features of both flatbed and wheel-lift trucks.	Towing heavier vehicles like buses, trucks, and large SUVs.

In addition to trucks, you’ll need towing accessories like chains, hooks, and winches. Don’t forget safety gear like reflective vests, cones, and lights to keep your team safe while working on the roadside.

Last but not least, you need to account for regular maintenance. It keeps your trucks running and avoids costly breakdowns. Budget for routine services and set up a schedule to check your equipment regularly.

Step 6. Set up an office and dispatch system setup

Even if you don’t have a physical office, you’ll need a way to manage calls, jobs, and billing. At a minimum, you’ll need a computer, phone, and internet connection.

One of the essential tools for your business is a dispatch management system. This software helps you assign jobs to tow truck operators/drivers, track your trucks, and keep everything organized.

Look for dispatch software that optimizes routes to ensure your drivers take the fastest, saving time and fuel. Upper is one such software that helps with efficient routing, dispatching, and real-time tracking.

Step 7: Price competitively

Pricing can be tricky, but it’s essential to get it right. Here’s what you can do about that.

• Start by calculating all your expenses, including fuel, truck maintenance, labor, insurance, and loan payments. 
• Research what your competitors charge. As a business owner, you want your rates to be competitive and profitable.
• Consider additional fees for after-hours service, complicated recoveries (like pulling a car from a ditch), and mileage beyond a certain distance.
• Always offer transparent pricing. Communicate your rates to customers upfront so there is no confusion or dispute later. This builds trust and ensures a smoother experience for everyone.

Step 8: Marketing and Promotional Strategies

Once you set up everything, it’s time to get customers. This is where marketing comes in. Start by building an online presence.

Effective Marketing Tactics

• Create a simple website that explains your services, contact details, and service areas.
• Optimize your website for local SEO so people in your area can find you when they search for towing services.
• Set up a Google My Business profile so you show up in local searches. Being listed there helps potential customers see your business when they search for nearby towing services.
• Social media is another effective tool. Platforms like Facebook and Instagram allow you to promote your services to local audiences. You can share customer reviews, towing tips, or even photos of your work.

Don’t forget offline marketing, either.

• Place ads in local newspapers or on community boards. 
• Consider partnerships with local auto repair shops, car dealerships, or insurance companies. They might recommend your services to their customers.

Remember, building a customer base takes time. Be patient and focus on providing great service. Word will spread, and your new towing business will grow.

By following these steps, you’re setting up a strong foundation for starting an independent towing truck business. Keep learning and adapting as you go. Before you know it, you’ll be a trusted name in your local tow truck industry.

What is the Cost of Starting a Tow Truck Business?

Starting a successful towing business involves several costs, and planning for each is important so you know what to expect. Let’s break it down step by step:

You need to consider different types of tow truck business start up costs and plan for each is important so you know what to expect. 

Let’s break it down step by step:

Aspect	Estimate Cost
Tow Trucks:
Flatbed tow trucks	~$75,000 to $130,000
Wheel-lift trucks	~$40,000 to $100,000
Heavy-duty tow trucks	Prices can go beyond $200,000
Used trucks	~$25,000 to $60,000
Insurance:
General liability, tow truck-specific insurance coverage, and on-hook insurance	~$7,000 to $15,000 annually
Licenses and Permits:	~$200 to $500+
Business registration, towing permits, possibly a DOT number	~$200 to $500+
Basic Equipment:
Safety gear, chains, and straps	~$1,000 to $2,000
Marketing and Branding:
Website, online advertising, local promotions, business cards/flyers	~$500 to $1,500
Operating Expense:
Fuel, maintenance, and employee wages (if you have tow truck drivers)	~$2,000 to $5,000 per month

Remember, these are ballpark figures. Your actual costs may vary based on your location and specific business needs.

5 Practical Tips from Experts to Make Your Tow Truck Business a Success

1. Be there when they need you

People don’t think about your service until they need it. If you are available and quick to respond, they are more likely to remember and recommend you. So, you must try to be available 24/7, especially when you are new in the industry. Showing up when others can’t will help you earn loyalty fast.

2. Don’t treat it like a side hustle

Towing needs your full-time attention. If you are thinking of running a job parallely, you are sure to miss out on potential opportunities and lose money and credibility fast. 

3. Learn your job (at least when you are just starting) 

Before you hire or delegate tasks, ensure you have the basic knowledge of every operation, whether it’s dispatching, equipment handling, customer interactions, or managing motor club calls. This builds real confidence and control.

4. Delegating, but don’t disengage

You can’t manage a towing business like an investor from afar. If you don’t understand daily operations, things can get out of hand. So, know your business in and out before you step back. 

How Upper Can Help You Enhance Your Tow Truck Operations

Upper’s route optimization software can help boost your tow truck business in different ways, as follows.

1. Optimize routes to save time and fuel

Upper automatically finds the fastest, most efficient route. This helps your drivers respond more quickly and complete more calls while reducing fuel costs. 

2. Dispatch with precision

With Upper, you’ll never send the wrong truck to a job. Assign vehicles based on proximity, capacity, and type, cutting down on confusion and delays.

3. Adjust on the fly for emergencies

Got a last-minute call or priority tow? No problem. Upper lets you assign jobs in real time without affecting your schedule.

4. Real-time fleet visibility

Know where your trucks are at all times. Upper gives you real-time tracking, so you can answer ETAs confidently and manage field operations smoothly.

5. Automated customer notifications

Keep customers informed with text or email updates, like when a tow truck is on the way. It’s a small gesture that builds trust.

6. Capture proof of service

Collect digital signatures and take photos on the job. Upper stores them securely for billing, insurance claims, or future reference.

Upper optimizes your business operations to deliver the best service to your clients. Experience it for yourself; try it for free for 7 days today!