The Complete Guide on How to Start a Tow Truck Business in 2024

Do you want to know how to start a tow truck company? Do you wish to start your own business but don’t know where to start? 

You’ve come to the right place.

The tow truck industry is rife with opportunities. The automobile towing industry in the United States is worth $11.3 billion and is expected to grow by 2.9% by 2022. This staggering figure shows that starting a tow truck business is feasible and profitable.

This article will help you with everything you need to know about starting your own tow truck company. We’ll go over the various towing services you can offer in your small business and the steps you need to take to start a successful tow truck company.

Start your engines because we’ll pull out valuable information to help you start a successful towing business.

Why Start a Towing Business? 

A towing company may be the way to go if you want to start a business that provides stability and little stress or excitement. Also, the towing business provides you with the following benefits.

1. High-profit margins

Starting a towing business offers the potential for strong profit margins. On average, tow truck businesses typically see net profit margins in the range of 10% to 15%. However, it’s essential to recognize that these figures are estimates, and the actual profit margins can vary based on the unique circumstances of each business.

In some cases, astute business owners have achieved remarkable profit margins, reaching as high as 70%. This substantial profit potential is one of the compelling reasons to consider launching a towing business.

2. You are your boss

You are responsible for almost all operations when you purchase a towing truck. Making decisions can be both empowering and liberating.

3. You have a good eye for mechanics

While a tow truck operator may not have to repair the vehicles they tow, understanding mechanics can help you identify automotive issues and advise customers. Furthermore, if something goes wrong with a truck, you might be able to fix it yourself.

4. You thrive in high-stress scenarios

You will almost certainly encounter many uncooperative vehicle owners who argue and become aggressive when you attempt to tow their vehicle, even if you are following the law. But, if you know how to handle these stressful situations well, you are suited to the towing industry.

5. It is highly scalable

Your company will always need new services, features, and products, with businesses and processes evolving daily. Furthermore, you can implement various business models and pricing tiers to reach a wide range of customers.

Things to Know Before You Start a Towing Company

Before we dive deep into the steps, you need to start a towing and recovery business. There are a couple of things that you should be aware of.

Do you need the experience to start a towing business?

No, even with no experience, you can start a towing company.

However, you will need to learn a few things, such as the mechanics of your truck, how to drive with a huge load, and how to load vehicles onto your tow truck to avoid damaging your client’s property.

What are the different types of towing businesses?

There are many different types of towing, just as there are thousands of different types of vehicles on the road. Most of these involve transporting vehicles from where they broke down to the workshop, but others are a little more unique.

The most common types of towing companies are:

1. Light duty towing services

These services are appropriate for most small cars, motorcycles, vans, and light commercial vehicles.

2. Medium duty towing services

It involves trailer and horse box towing.

3. Heavy duty towing services

It involves towing commercial vehicles, up-righting rolled-over trucks, load shifts, etc.

4. Transportation services

It involves the transportation of compressors, generators, construction equipment, etc.

How to get your tow driver ID?

A Tow Driver ID is required to start a towing business and drive a tow truck yourself.

To get a Tow Driver ID in the United States, you’ll need the following qualifications:

• 18 years of age or older.
• A commercial driver’s license.
• A perfect driving record.
• In the previous three years, no more than three accidents occurred within a year.
• No DUIs in the last five years.
• No more than one DUI in the previous ten years.
• Conversational English is required.

Based on your location, exceptions and more specific criteria may apply to these rules. The main goal of these stringent guidelines is to ensure that only trustworthy individuals operate tow trucks and handle vehicles. Additionally, ensuring your dispatch office and parking facility meet required guidelines adds to a more secure and reliable towing service.

10 Steps to Start a Towing Business

A towing company is a profitable and evergreen venture that cannot be affected by the recession. However, getting started necessitates preparation. Let’s detail the steps you need to know before you start your towing business.

Step 1: Choose the towing service you want to provide

Starting a towing business is simply the initial step; you must also decide what type of towing business you want to open. Tow truck companies are classified into two types: retail towing, also known as consensual towing, and non-consensual towing.

• Consensual towing is when a company offers roadside assistance to a customer whose vehicle has broken down or been damaged in an accident.
• Non-consensual towing companies work with private property owners and law enforcement to tow vehicles illegally parked or otherwise in violation of the law. 

However, non-consensual towing companies face their own challenges, such as belligerent, uncooperative vehicle owners and strict local regulations governing where and how long vehicles can be impounded. Non-consensual towing company owners spend a lot of time in court, but they rarely lose cases.

Therefore, understanding the dynamics of each type of towing and taking into account your actual location is essential before starting your business venture.

Step 2: Make a business plan

Every successful company begins with a good idea and a solid plan to back it up. Writing a towing business plan may appear daunting, but it simply entails getting your ideas out of your head and onto paper.

You’ll need to decide what type of towing services your company will provide and who will receive them. Business expenses also play a crucial role in your planning.

Will you do all the towing yourself, or will you have a team of tow truck drivers working for you? 

Making these decisions early on will assist you in determining the structure of your towing business.

In addition, you should figure out your business budget and choice of location. You should know how much you will spend on a truck and other startup expenses for your company. 

While business planning do consider insurance, marketing, and branding materials. Also determine how much you will need to charge for your business to be profitable. 

Will you charge flat rates or by the hour? 

It’s a good idea to develop specific processes for your tow truck business at this point. For example, you should write down the steps you’ll take every time you go out on a call, from when your phone rings until you deliver the vehicle to its final destination.

Step 3: Register your business

You must first complete some important paperwork before you can open your doors for business. To register your company with state and local agencies, you must choose the business legal entity that will influence how you file your business taxes and risk exposure. This decision also plays a crucial role in establishing your business name and brand identity in the market.

We’ve narrowed it to the two most common:

• Limited liability company

  Limited Liability Company (LLC) can be formed as a single entity or with several business partners. This business structure appeals to tow truck companies because it provides some personal liability protection. You, the individual, are protected during a legal dispute.

• Corporation

  Forming a corporation may be the way to go if you want to grow your business into a national brand. This independent business entity enjoys many of the same liability protections and tax advantages as LLCs and others. However, more paperwork is required, such as creating bylaws and forming a board of directors.

You will also require liability insurance and business insurance. You can consult with a lawyer to determine what type of liability insurance you need and how to structure your contracts to protect yourself if a vehicle towed by your company is damaged.

Accidents happen, but accidents involving something with a monetary value, such as a vehicle, can be extremely costly to your company. Ensure you have adequate insurance not to cost your company a fortune if something goes wrong.

Step 4: Open a bank account and register for EIN

After registering your towing business, you should apply for an employer identification number (EIN), which is essentially a tax identification number, on the IRS website. Your EIN allows you to open a business bank account on behalf of your new towing company.

Open a bank account with a debit card and charge all business expenses. This includes towing vehicles, equipment, gasoline, tow truck insurance, truck financing, and anything else required to perform your duties.

Business accounts will keep your tow truck business finances separate from your personal finances. This will help to avoid tax headaches and build business credit. Business credit helps to qualify for credit cards and other lines of credit. 

Step 5: Obtain licenses and permits

To operate a towing and recovery business, you must obtain the necessary licenses and permits. Check with your state’s Department of Transportation to ensure you meet all requirements for the business license. Business owners need to check with their state and local city county clerk office to check for specific permits. 

Tow truck vehicle owner will typically need to obtain the following company license and permits:

• Indictment management permit 
• Private property permit
• Consent to tow permit 
• Oversized vehicle permit
• Overweight vehicle permit
• Class B driver’s licenses

Step 6: Purchase a tow truck

To provide towing services, you’ll need to purchase a tow truck. As it will be your most expensive purchase so you can go for business loans. Depending on the model, the tow truck cost will likely range between $40,000 and $100,000.

The type of tow truck you purchase will determine the services your company can provide. You won’t be able to transport an oversized load, such as a standard-sized vehicle, with a truck designed for regular vehicles.

Here are various types of tow trucks you can choose for your business:

• Flatbed trucks
• Tow truck for oversized loads
• Tow trucks with wheel lifts
• Tow trucks with hooks and chains

Step 7: Look for a route planner 

Fast response times enable a tow truck to compete with other towing services. Individuals frequently want their vehicles towed as soon as possible when they break down, and property owners want improperly parked cars removed as soon as possible. Providing prompt service keeps these customers satisfied.

However, manually planning routes is time-consuming, and this method results in going on fixed routes with no real-time data about the current condition.

Route planning strategies are essential if a company wants to reduce all unnecessary overhead  costs.

Avoiding route planning hurts both performance and fleet management.

Therefore, it is preferable to use intelligent route planning software to find efficient routes.

Step 8: Identify your target market

With the legal issues settled, it’s time to move on to the fun part: determining your company’s target audience.

Regarding towing, you should decide whether you want to go the B2B or B2C route. B2B is an abbreviation for “business to business,” meaning you’ll serve other businesses. B2C implies that you will serve customers directly.

Making this difference from the start will help you with everything you do for your tow truck business in the future.

What types of businesses will you serve if you do? 

Will they be roadside assistance companies like AAA, or will they be local garages and auto repair shops?

For heavy load towing, your company could specialize in moving manufactured homes and equipment, so your target audience would be builders or construction companies.

And on the consumer side, you could tow vehicles for people who have a breakdown and prefer to take their car home rather than to the shop.

Determine who your company will serve, and then create a more specific ideal client profile.

Step 9: Build your brand

Establishing your brand will be a piece of cake once you’ve identified your target audience.

Your brand’s visual elements will include your website’s logo, fonts, color palette, business cards, pamphlets, and other marketing materials.

The ultimate goal is to create a brand that connects with members of your community and fosters brand loyalty. You want your brand to be the first thing that comes to mind when someone needs a tow truck.

Step 10: Promote your business

Consider how you will publicize your business. Here are some marketing suggestions for your tow truck business to reach their potential customers:

• Create a website

  Create a website that includes an online request a quote or booking form, as well as a list of your services, experience, and relevant licenses and permits. Make sure your website is optimised for search  engines, this will ensure your site ranks high when someone searches for two truck services. Finally, make sure your website is designed for both desktop and mobile users.

• Create an account on social handles

  Establish business pages and accounts on Yelp, Facebook, Google my Business, and Twitter for online presence where you can share updates, news, images, and reviews.

• Advertise

  Spend your marketing budget on advertisements in local newspapers, online forums, radio, and highway billboards. Print flyers and business cards and hand them out to local businesses.

Know How Upper Route Planner Helps Your Tow Truck Business Become More Profitable

Upper is now used by most tow truck businesses to streamline routes for truck drivers. Business owners want to save money and time by developing automated routes.

Manual route planning was difficult to follow, resulting in increased fuel costs, slow services, vehicle maintenance costs, and poor customer feedback.

So, we introduced one of the best route planning software to assist businesses in addressing these issues.

You will not only be following a well-optimized route with Upper Route Planner, but you will also have customer details and their location readily available on the portal.

Why not try us out for a 7 days free trial? You will have full access to our features, which you can use in your towing business. Check to see if it helps you save money and time.

Conclusion

Starting a towing business is doable, but it will take some grit and dedication on your part to make it successful. Don’t be afraid to devote extra time to developing your business plan. It will help you succeed and secure startup funding, especially when purchasing your tow trucks.

You’ll increase your tow truck business’s chances of success if you follow these steps, secure the necessary startup funding, and have a passion for serving your customers.

Alongside, you require quick route options that streamline your towing business, and Upper Route Planner is the best option to save time and increase productivity for your operations.

To experience the transformation, sign up for a free 7 days trial.