How to start a tow truck business

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You need to develop a business plan, register your business, and acquire licenses, permits, and business insurance in order to start a tow truck business. For details on these steps and others you can take to start a tow truck business, use this guide:

Develop a business plan. This is the first step to starting your two-truck business and it is very important. You'll need to do market research on the tow truck industry in your local area to properly complete your business plan.
Your business plan should cover customer research, competitors, a startup budget, and financial projections for your business.
Other things you should add include the problems you will be solving for clients and customers, what sets your business apart from the competition, the resources your business will depend upon, and your business's mission statement and vision for the future of the company.
Your business plan is a critical document for yourself, especially if you are looking to get a small business loan or investors in your company.
There are many things to cover in your business plan for a tow truck company. Here we will try to touch on everything you should cover.
Your consumer base
Most people think of tow trucks as they relate to roadside assistance, but there are many different kinds of tow truck services. Here are some of the most common tow truck services:
- Roadside assistance
- Towing impounded cars and vehicles
- Towing services for a specific city
- Auto repair shops towing services
- Law enforcement towing services
- Auction house towing services
Write up a budget for your business plan
You need to carefully plan your business budget, so you know you have enough capital to make the purchases required to start a tow truck business. Here are some of the most common costs associated with starting and running a towing company:
- Licenses and permits
- Purchasing tow trucks
- Commercial tow truck insurance
- Employee wages and salaries
- Business insurance
- Marketing expenses
- Vehicle maintenance
- Gasoline
Determine what equipment you need to purchase or rent
Buying a new tow truck can be quite expensive, they can cost up to $100,000, or more in certain cases. You can also look into purchasing a used-tow truck or a fleet of used tow trucks. Just be sure to take truck maintenance and repairs into consideration when calculating these costs.
Here are the most common tow trucks used in the industry:
Flatbed trucks are by far the most common. They have long beds with flat tops, which makes it easy to navigate a car or vehicle in place and secure to the bed of the tow truck.
Integrated tow trucks are heavy-duty tow trucks. They often have additional axles for towing extra-large vehicles, like other large trucks or even buses.
Hook and chain tow trucks used to be the most common tow trucks until the popularity of flatbed tow trucks grew. This kind of tow truck is most often used for towing wrecked or totaled vehicles to an auto repair shop or junkyard
Depending on exactly what type of towing business you want to start, your needs in terms of the type of tow truck may vary. Flatbed tow trucks are the most popular because they are the most versatile kind of tow truck, and they have no problem hauling small or large vehicles.
Figure out your pricing
Towing services typically charge their customers a flat fee for the tow, a mileage fee, and in certain cases, a storage charge.
Many tow truck businesses set their standard towing rate between $75 to $125. On top of this, they then assign a mileage fee between $2 to $4 per mile during towing transit.
If you are providing the service of housing the vehicle overnight, you can also charge a storage fee.
Once you have done your market research and drawn up your business plan, you are ready to take the next step in starting your towing business.
Register your tow truck business, and obtain an EIN. You need to register your tow truck business and obtain an EIN to operate legally. Also, you should familiarize yourself with the legal requirements for a small business in your city or state.
You might want to consider applying to become a limited liability company (LLC). If you operate as an LLC, your personal and company information is entirely separate. While this changes your tax status, it does protect you from personal losses based on the company's performance.
An LLC is also a good option because once your tow business starts to grow, you'll be able to hire employees to help you.
Another option is to become a sole proprietorship. This is the most simplistic business formation and requires the least amount of paperwork. The big downside with a sole proprietorship is that you assume all liability with your business. It is also a risky move for a tow truck business, considering the inherent hazards and risks that come with operating one.
Your last option is to form a corporation. This is the move you want to make if you are trying to start a towing business and have it grow into a nationwide brand.
This comes with many of the same protections and limited liability as an LLC; however, there is more paperwork to do, plus you would have to create a board of directors and write bylaws. This is also the most expensive route.
After you have this determined, you should then get a Federal Tax ID number. This helps you get a license to run your business. This is also referred to as an EIN or Employer Identification Number. To hire drivers, you must obtain your EIN for tax purposes.
Your employer identification number (EIN) is critical to starting and growing your business. It helps with matters like opening a business bank account and paying taxes. Essentially it is like a social security number but for your business. In certain states, you may also have to get a tax ID as well.
Acquire the necessary licenses, permits, and business insurance. These are all mandatory requirements for starting a tow truck business.
You and all your drivers must have a valid CDL license to operate and drive your tow truck(s).
CDL licenses fall into three different categories:
- Class A
- Class B
- Class C
Class B is the necessary Class of CDL for tow trucks. This authorizes a driver to operate a vehicle that weighs over 26,000 pounds or tow another vehicle that weighs 10,000 pounds or less. A Class B license also clears you to drive straight trucks, box trucks, and large passenger buses.
Trailer gross weight rating restrictions separate Class A, and Class B. Class A license allows you to drive tractor trailers, while A Class C license allows you to drive smaller vehicles, like passenger vans and certain delivery trucks.
Now we'll look at some permits you might need to obtain for your tow truck business:
Indictment management permit to tow vehicles without consent when requested by law enforcement is a permit most tow truck businesses must have.
Private property permit to tow vehicles without consent when requested by the parking facility owner. This comes into play if you lend your services to specific apartment buildings or commercial establishments.
Consent to tow permit to tow vehicles with consent by the vehicle owner. This permit mostly refers to roadside assistance.
Oversized vehicle permit to operate a tow truck that exceeds a certain weight load. The necessity of this permit depends upon the type of tow truck business you are starting.
Next up is insurance. There are many different kinds of auto insurance you may want to obtain for your tow truck business. We recommend speaking with an experienced and licensed insurance agent to dig into the details and find out exactly what plans you need.
Here are some common auto insurance plans for tow truck businesses:
Auto-liability insurance covers you or your driver when you or they are at fault in an auto accident, and your business must cover the other driver's medical and property expenses.
Physical damage insurance covers any necessary repairs to your tow trucks during auto accidents.
Comprehensive coverage is useful when your vehicle is damaged outside of an auto accident, such as a fire, theft from your tow truck or theft of the truck itself, falling debris or objects, or hitting an animal.
On-hook coverage is needed for protecting your business if any vehicles become damaged while hooked up to your tow truck.
Uninsured motorist insurance covers any injury to you, your drivers, or a passenger of your tow truck if caused by a driver who doesn't have insurance or in the event of a hit-and-run accident.
Secure a motor vehicle record (MVR). This step is fairly simple in most states, but you should still do the proper planning in the event of delays.
In most states, there is a fee you must pay to get a motor vehicle record. In certain states, you can also accomplish this online and get a digital version. In other states, drivers may need to pick up a physical copy or have it mailed to their home address or to your business address.
Obtain a Transportation Workers Identification Credential (TWIC). These credentials are critical if you want to have variety in the types of loads you can legally haul with your tow truck business.
A TWIC also lets you access secure areas, such as ports and other maritime hauling-related facilities. You should only take this step if it applies to your tow truck business model.
Apply for a DOT number. A DOT number or Department of Transportation number is a requirement for certain kinds of tow truck businesses and can be a little more challenging than other steps.
You should first determine if your type of tow truck business needs a DOT number, then look into obtaining one.
Market your tow-truck business. Make use of all of the internet tools at your disposal to market your tow truck business.
Social media is one of the most popular marketing tools currently and can be somewhat useful for tow truck businesses.
However, an even more effective internet marketing tool for tow truck businesses is SEO searches. Tow truck customers are more likely to do a quick Google search for a tow truck rather than connect with your company via social media platforms.
When optimizing your content for SEO, you should look to rank for terms particular to your locality, like "tow truck New York" or "towing service in Florida." You can even narrow it down to your specific region, county, or city.
When locals in your area are searching these types of terms in Google, this increases your opportunity of being found on the first page of their search results.
In addition, you should also make sure you fill out online business profiles on sites like Yelp, Google, and others, to increase the odds of your tow truck business popping up as an option.
Another online resource you need to take advantage of for your towing business is a website. This is relatively inexpensive, and if you have some extra cash, you can hire a professional to do a solid website design for you.
Your website should include your pricing and contact information, as well as things like customer testimonies about your towing services. If your drivers are always on time and hardly ever damage the vehicles they are towing; customers usually won't mind expressing gratitude by writing a quick testimony or review for your tow truck business.
Also, be sure to link your social media business accounts with your website and vice versa.
The last thing you should definitely consider in terms of marketing your tow truck business is to become an AAA contractor. The American Auto Association is an extremely well-known roadside assistance brand. And many of the tow trucks that AAA sends out are local contractors.
If you partner with AAA, your tow truck business will receive a lot of benefits. Many everyday drivers are AAA members and rely on their road assistance services. This means that you will see more business if you partner with AAA because anytime an AAA member calls for a local tow in your area, one of your tow trucks might get dispatched.
Partnering with AAA also boosts your business's credibility and reputation because AAA is a very trusted brand known and used by so many different drivers. Contact AAA or visit your local office for details on how to become a contractor for them.

Skills	Percentages
Transport Vehicles	22.14%
CDL	16.87%
Customer Service	14.16%
Loaders	10.40%
AAA	7.68%

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