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8 Simple Steps to Starting and Growing a Towing Company

The towing industry is thriving and nearly recession-proof. In 2021, towing companies pulled in over eight billion dollars and is growing by 2.7% in 2022. Read on to learn how to start a tow truck business that can support you for years and how you can effectively scale it up.

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Investigate realistic expenses and expected revenue

When starting a tow truck company, the first steps should be to determine what your strategy will be and how much money you need to implement it. Fixed and variable expenses will vary depending on your needs, such as work uniforms and vehicle repairs. Take inventory of what you will need to start, including vehicles, tools, communication systems, etc. Don’t forget to consider ongoing expenses such as fuel, storage and repairs.

Determine your target market

Performing market research is a critical step in starting any new business venture. It’s likely local authorities and business owners will already have towing contracts with an existing company. So, in the short term, focusing on breakdown recovery or other ad-hoc orders may be the easiest route. As you build your reputation, you can look to earn contracts doing towing for private parking spaces and the local police or offering recovery services for firms with large fleets of vehicles.

Outline your services offered

Certain services may require the use of extra equipment. If your company is equipped/qualified to offer those services this could be a good way to stand out from the crowd. Some specialist service options include:

  • Roadside assistance
  • Towing large commercial vehicles
  • Off-road recovery
  • Towing heavy loads
  • Farm equipment recovery
  • Out of hours recovery services

Prepare your pricing and fee structure

When determining your pricing structure for towing services, keep in mind local regulations that may affect you. For example, Oregon towing law dictates that companies may only charge customers a fine if it is a gate-fee fine incurred after regular business hours. Research to see what local competitors are charging and set your prices accordingly, taking into account:

  • The size / type of the vehicle towed
  • The time of the callout
  • Response time for the callout (urgent response vs pre-booked)
  • The distance the vehicle was towed
  • Any additional service (e.g. storage)
  • Any fees for toll roads

Gather the required licenses and insurance for your towing business

Depending on your location, the licensing needs to operate a towing company may vary. Make sure to perform adequate research and reach out to a trusted professional in the towing industry for guidance.

Towing company licensing requirements

As with most specialized businesses, a business license is required. In order to open a business checking and merchant account, as well as file taxes, you’ll need an EIN to provide to your chosen financial institutions.

Permits for oversized vehicles may also be required if you use them. Contact your state department of transportation to see exactly what you’ll need to attain.

Insurance needs for tow truck companies

Insurance covers several areas of liability for a towing company, including:

  • Employee insurance, such as workers compensation, disability, unemployment, health and liability
  • Vehicle insurance
  • Property insurance for any facilities and equipment
  • Small business insurance, such as liability and E&O insurance, to protect against legal fees in case of an incident
  • On-hook insurance to protect against damages incurred while a vehicle is hooked up, and cargo insurance to protect against financial responsibility for the vehicle owner’s valuables
  • Umbrella insurance for comprehensive insurance protection from additional and unforeseen liabilities
  • Garage Keepers insurance to cover the cost of items inside your storage lot damaged by events like theft, fire or natural disaster
  • Wrongful Possession insurance to protect against being sued when you’re mistaken about ownership of a vehicle

Find the equipment you need to operate

Once you figure out what services you want to provide, you can go about searching for the right vehicles for your company. Many towing companies use flatbed trucks, as the chain-and-hook way of towing can damage cars either by scratching paint or disengaging the bumper, among other potential issues. If you want to tow crashed vehicles, you may want to invest in a wrecker with a wheel lift and boom or an autoloader.

You can save money upfront by purchasing or leasing a used vehicle, and this may also save you a bit on vehicle insurance costs. When selecting a truck, keep in mind your local weather—for example, when you work in a snowy area, salt and water tend to corrode steel, so perhaps a composite or aluminum bed would be better for your truck.

How to start a tow truck business and create your working space

A successful tow truck company has many processes that need to be taken on every day, such as:

  • Finding towing leads
  • Responding to calls for service
  • Keeping a well-maintained fleet of trucks
  • Performing accounting activities and managing employees

When a customer calls in to have a vehicle moved, the person answering the phone should have easy access to the tow truck drivers’ current locations as well as a way to quickly communicate. The ability to determine the best driver to send on a call can prevent drivers from spending too much time driving or needing to turn around for a different vehicle.

These activities are usually performed in-office, but in this digital age, companies can keep a virtual office. A well-built website can help customers find and book services, potentially increasing your towing leads. These clients can share your services online with their friends, giving you the opportunity to ask for referral leads.

Dispatching is made much easier with technology such as towing software. With the ability to dispatch, communicate and manage employees all from one program, the right software can make towing operations significantly easier.

Small towing companies can work off of a cell phone, but as you scale your company, you’ll want to begin investing in office equipment, such as computers for dispatchers to easily organize calls. In the beginning, you can choose to invest in good smartphones for your drivers or even outsource to a call center with trained dispatchers familiar with the industry.

Identify your office space needs and find your business headquarters

When looking for the ideal place to create your company HQ, keep in mind the current and future size of your fleet and workforce. If you intend to grow your fleet quickly, ensure there’s enough room to keep the trucks and maintenance equipment safe as well as sufficient office space for your dispatchers and administrators. Many drivers actually park their vehicles at their homes, but to ensure the safety of your fleet, you may want to invest in a storage property or use a local vehicle storage facility.

Having enough space to store your vehicles and operate a functional business can make or break a company. More profitable contracts, like those with the city, will inevitably require you to have your own tow yard. As you grow your business, keep an eye out for properties that can facilitate your growth if you don’t already have one in mind to rent or purchase. Some localities require towing companies to acquire a zoning permit before setting up shop, as well.

Design your virtual presence

A well-designed website attracts high-value clients and helps new customers locate your company. It also provides an online workspace where clients and employees can interact with the company quickly online instead of calling and taking up valuable overhead time. Some helpful functions that can be easily added to a website include

  • Quote forms for common towing jobs
  • Order / payment pages
  • A knowledge base / FAQ for prospective customers
  • A chat feature for those needing more detailed information
  • A blog (for keyword-rich content to help with SEO)

You can outsource the project to a web designer, or if you have a bit of creativity and a vision, you can build your own website. Even if you don’t have web design experience, there are online platforms that make it easy to drag and drop your way to an awesome site, such as Wix.

  • Once you’ve created your website, you’ll need to submit it to online business directories. A large number of tow truck calls are made by people who found a company by doing a quick internet search. If your company doesn’t have an effective online presence, customers won’t be able to find your listing in an emergency.
  • Once you’ve established your web presence, you can begin to advertise online. Most business directories give you the option to pay for advertising, usually invoiced on a pay-per-click basis or by displaying a set amount of ads per billing cycle. If you accept visitors at your premises, consider advertising on Google Maps, and make sure your company’s details are properly completed, so prospective clients can click to call you directly from the search results.

Find the right employees for your company

Building a strong team is essential to keeping a company running smoothly. There are many moving parts to a towing company, each of them with its own staffing needs. Your dispatchers and admin team are just as important as your truck drivers and engineers.

Being an employer means more than simply interviewing applicants, picking some to hire and processing their paychecks. It’s essential to follow the proper hiring process to ensure your legal obligations are met and the people you’re hiring are reliable. Some important things to consider include:

  • Draw up a detailed employment contract and make sure the job description matches the contract
  • Eligibility to work in the United States needs to be verified with an I-9 form within three days of employment
  • For positions that involve handling money or dealing with the general public, you may wish to use integrity testing as part of the interview process
  • References, education and work history should be verified
  • Confirm the applicant’s driving license qualifies them to drive the correct class of vehicle in the United States
  • Background screenings and drug tests are essential for drivers and may be administered to all staff members if you choose
  • An orientation period with appropriate training and new hire paperwork
  • Check the employment laws in your state regarding probation periods and disciplinaries
  • Confirm the working hours regulations for drivers in your state and in neighboring states if jobs are likely to cross the border

Office staff

Depending on the size of your business, you may only need a receptionist and office manager, along with a few dispatchers. Make sure that as your company grows you always have enough dispatchers to keep up with the call load to avoid them making costly mistakes. A small office may be able to fulfill general cleaning tasks with the clerical staff, and training can be handled by the office manager until it’s appropriate to hire a human resources team. If you are leasing office space, building maintenance will generally be handled by the property owner.

Towing force

Depending on your location, there may be many requirements for a person to become licensed as a tow truck operator and your job as the employer is to verify the proper licenses are held by your drivers. It’s also important to check DMV records and employment history to make sure your drivers are qualified for the position.

Passing a drug screening test is essential to the onboarding process, because insurance companies and the workers compensation program may not pay on a claim if the driver cannot pass a drug test.

Expand your operations by bidding on government and corporate contracts

When you decide it’s time to scale up your business, start by seeking out and applying for, or bidding on, towing contracts. This can mean you bid to be the preferred tow company for residential areas, medical centers or governmental buildings. These contracts can be lucrative, providing a steady income for a towing company.

Keep in mind that high-value contracts, such as local police force tow rotations, have more requirements to be eligible to bid, such as having access to a private, well-lit and secured towing yard to store impounds. There is also usually a minimum fleet size requirement to take on city contracts.

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