Vehicles often break down and end up illegally parked.
A tow truck service transports these vehicles as needed to repair shops, impound areas, and other locations.
Some tow trucks even provide emergency roadside assistance.
In this review, we’re going to cover everything you need to know about how to start a tow truck business.
As a matter of fact…
What I’m about to share with you is exactly the same information that has helped more than 77% of our readers with their questions about how to get started in towing.
Now, I do want to say this first…
Even, though you might have some pre-conceived notions about driving a tow truck… when you’re finished with this review, you’ll feel pretty confident that whatever decision you make will be the best one for you.
On top of that…
Towards the end of this article, you’ll find answers for some of the most frequently asked questions about how to start a successful tow truck business and other alternatives.
So let’s get started…
Now that you’ve found the right business idea, it’s time to get on to the next steps. It is not enough to register your business with the state. There are many other aspects of starting a business.
This is a simple guide on how to start a tow truck business. These steps will help ensure your business is adequately planned, legally compliant, and registered.
For entrepreneurs to succeed, a clear business plan is crucial. This will allow you to map out your business’s details and uncover some hidden opportunities.
Here are some important points to remember:
Because business owners must buy a tractor to open this business, the startup costs for a tow truck business can be high. Tow truck paper lists them for sale. They are usually priced between $10,000 and $50,000.
Additional startup costs include licensing fees. The Class B license costs are not the only expense. Business owners also need to get permits from their state.
Other licenses may be required by local municipalities or highway departments. Check with your state, county clerk office, or city to see what permits you need and how much.
They often cost at most a few hundred dollars, but they may be more.
An insurance policy must be purchased by any business. A few hundred dollars may be required for the first month.
A tow truck business’ fixed expenses include all renewal fees and insurance premiums. Variable costs are fuel, truck depreciation and repairs, employee salaries (i.e. tow truck driver), and employee wages.
Multiple outlets may call tow truck companies. Tow trucks can be contacted by police departments, municipal departments, individuals, and motor clubs to tow vehicles.
Tow truck drivers make money by charging customers for their tows. A typical charge would include a flat fee to tow, mileage fee, and storage fee.
Tow truck companies charge an average of $120 per job, including a flat charge and a mileage cost). For vehicles that are kept on company property, it is standard to charge a daily fee. The average storage fee for a vehicle is $20 per hour.
The average tow truck business owner earns $30,000. The exact amount is dependent on where the business is located.
A tow truck business can diversify and increase its income by providing emergency roadside help. This often includes fuel deliveries, changing flat tires, and offering jumpstarts.
It is both crucial and challenging to choose the right name. Opening a business under a different name other than the owner’s personal name is possible under a sole proprietorship.
When registering a business name, experts recommend that you do thorough research on the following:
The types of business structure that are commonly used are the following:
A legal business entity protects the business against being held personally responsible if your tow truck business gets sued.
An LLC can be set up easily by anyone with only minimal state LLC fees. Alternatively, an LLC service provider can do the job for a small, additional fee.
It is necessary to choose a registered agent for the LLC. A free annual registered agent service is often included as part of any LLC formation packages. The owner can act as the representative or opt to avail of the benefits of a registered agent.
Before opening the business, the owner will need to register for various state and federal taxes. To register for taxes, an EIN is required, which is a straightforward process and completely free!
The EIN can be obtained free of charge through the IRS website, fax, or mail.
There are many options available for taxation of the business depending on how it is structured. An example of this is an LLC that could be taxed as an S corporation(S corp).
Below are some guides about small-business taxes that are worth checking out:
It’s important to note that specific state taxes and franchise taxes may apply to the business.
For personal asset protection, it is important to use dedicated business credit accounts and banking accounts. Separating personal and business expenses is considered as one of the best practices in any industry.
In the event of a lawsuit, personal and business assets such as the home, car, and other valuables of the business owner, become at risk if they are mixed. Business law calls it “piercing the corporate veil.”
Additionally, building business credit can be a way to obtain credit cards and financing under the business name and better interest rates and credit lines.
To better understand the business’s financial performance, it is essential to keep track of all of the expenses and income. It is also easier to file annual taxes if detailed, accurate records are kept.
Failure to obtain necessary permits and licenses may result in heavy fines or even complete business closure. Below are some points to remember when obtaining a business license and permit for a tow truck business.
Licensing is usually required to operate a towing company. Tow trucks must have three permits in most states.
Local licensing and regulatory requirements might also be applicable. You can find more information on local permits and licenses here.
Michigan is one state that requires towing businesses to obtain an “oversize/overweight vehicle permit” for their tow trucks. Sometimes, these tow truck companies are also called “wreckers.”
Licenses in most states are issued according to the vehicle’s weight. A commercial driver’s license (CDL) of class A must operate standard cars or trucks. However, heavier vehicles such as tow trucks and other heavy vehicles require a Class C CDL.
A tow truck company is usually run from a physical address. Businesses that are located in a physical place require a Certificate Occupancy. A CO is a document that confirms compliance with all applicable building codes, zoning laws, or government regulations.
If you intend to lease a place:
If you’re looking to buy or construct a new location:
Like licenses and permits for businesses, insurance is necessary to ensure that any business can operate legally and safely. Business insurance protects the company’s financial health in the event of a covered incident especially that this line of business involves construction work.
Many types of insurance policies can be purchased for different types and types of businesses, with various risks.
General Liability Insurance can help determine the potential risks to the business.
This is the most widespread coverage small businesses require, so it’s an excellent place to begin for a tow truck company.
Workers’ Compensation Insurance is another crucial insurance policy that businesses will need. The state will likely require company workers to have Workers’ Compensation coverage.
The brand is the company’s identity. It is also how the business is perceived in the eyes of the public. A strong brand will make any company stand out from the rest.
Tow truck companies should have an online presence to allow people looking for a tow truck to find them.
While tow truck companies should not ignore social media marketing channels, it is better to focus most of their resources on local search engine optimization (SEO).
People are more likely to engage with a tow truck company via Facebook or Twitter to search for a local service.
Tow truck companies often seek contracts with municipalities, repair shops, and other businesses. These contracts offer a stable income stream that is more reliable than advertising towards individuals.
Many companies also have agreements with auto clubs such as AAA. These clubs offer a lot of business but often only pay a small fee per tow.
These contracts are often used by companies to make calls. However, successful companies will also seek out other lucrative contracts.
Towing companies can’t compete with tow trucks because they have faster response times. People want their cars quickly towed after they break down.
Property owners also want to have any improperly parked vehicles removed as soon as possible. These customers are happy if they get prompt service.
Speed of service is crucial when contracting with police departments and municipalities. Multiple towing companies are often employed by government agencies.
They will notify each company when a vehicle needs to be moved. The first company to reach the vehicle usually gets it towing, while the rest don’t get any work.
The next step after defining the brand and creating a logo is to create a website.
Though creating a website may be essential, others might fear it is too difficult because they lack the necessary experience.
Although this was a legitimate fear in 2015, the web has seen significant advancements over the years that make the lives of small business owners easier.
Setting up a business phone is one of many ways to ensure that private and professional lives are separate.
This isn’t all.
It can also help tow truck businesses become more automated, increase the company’s legitimacy, and make it easier for potential customers and clients to reach the company.
There are many services available for entrepreneurs who want to set-up a business phone system.
If you have mechanical abilities, you may be able to start your own towing company. Towing vehicles is often simple.
Sometimes though, it can be complicated to hook up a damaged vehicle or remove it from a tight spot.
This situation can be solved by a mechanically inclined person.
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What exactly is the skill?
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What we mean is…
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Now, we know you probably have tons of questions…