How To Start A Towing Company

One of the reasons I wrote the book How to Start a Towing Company was that I made many mistakes when I first started out.
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And I wanted to help you to avoid these same mistakes. I want you to do it the right way.
Initially, I was more of a technician (like from the book The EMyth) than an entrepreneur with a business mindset.
But over time, I learned from my mistakes and made a lot of money.
Anyway, I mention my book because I get a lot of emails from people in and outside the industry who have questions, and the answers are in the book.
Here’s a question I got the other day.
“I was just on your website. What are the general requirements when starting a towing company? We want to get started right away.”
My reply:
“Depending on the type of towing business you start and the location, the requirements will vary. But what I have here for you would be a good place to start.
Licensing and Regulations:
Learn what the necessary licenses and regulations you need to comply with when starting your towing business.
These are dependent on the type of business you start and where it’s located. Consensual towing versus Non-Consensual Towing, or a combination of both.
Parking enforcement (AKA impound towing)? Working with law enforcement? Heavy-duty towing?
These are questions that must be answered before you can know what types of licenses you’ll need to acquire as well as what regulations you’ll need to abide by.
Next is…
Equipment and Investment:
Once you have the licensing and regulations determined, you can get a better understanding of what type of tow trucks and equipment you’ll need to start a towing business and what the estimated initial investment will be.
For example, if you’re running a consensual towing business out of your home, your investment may be as small as $40,000 for a used flatbed tow truck.
However, if you’re operating a non-consensual towing business, you’ll need a secure lot and possibly a 24-hour facility, depending on the regulations in place.
So, you’ll need to lease or buy property and have additional staff.
And, of course, you’re going to need insurance.
Insurance Requirements:
The types of insurance you’ll need will also be dependent on the type of business you start.
While you’ll need Comprehensive Collision, Liability, On-Hook, and Cargo insurance for both consensual and non-consensual towing, you’ll also need Garage Keepers Insurance for vehicles that are kept on your property.
And you also want to get Worker’s Compensation Insurance for your employees.
Of course, other types of insurance can be helpful, such as loss of income insurance, but they are not required.
Then, you’ll want to do a comprehensive analysis of the market you’re entering.
Market Analysis:
You’ll want to ensure that the location where you start your business has sufficient demand. I always suggest that you seek out an area with at least 40,000 people within a 10-mile radius.
If you’re in a rural area, even if you’re close to an interstate, you better understand that the number of people who need towing or roadside assistance will be substantially less than if you’re in a major city.
Also, if you live in a depressed area, there may not be sufficient demand for your services. So, before you pull the trigger and start your business, ensure the folks in the area you choose have the means to afford your services.
The Last thing I’ll say on market analysis for now is don’t be discouraged if you see other towing companies operating in the area.
While you might assume that the area has too many competitors for you to start, seeing other towing companies is a good sign that there’s sufficient demand for your services.
Besides, your goal is to differentiate your business from all the others.
Once you’ve figured out where you want to set up shop, the next highly important piece of the puzzle is to determine how you’re going to get customers.
Client Acquisition and Marketing:
How will you acquire customers?
Many startups believe they can rely solely on work from motor clubs or auction houses, but they quickly learn that these companies pay much less than cash-paying customers. This is where we help our clients with online marketing, including SEO and Google Ads.
There’s much more to unpack, but I hope that helps.
Thanks”