A tow truck business might be the most loved and the most hated business in every community at the same time. They are loved because they come to the rescue when a vehicle is stranded at the side of the road. They are hated when vehicles are removed from illegally parked locations and create impound fees that owners have to pay. This essential service is almost recession-proof, so knowing how to start a tow truck business could be your ticket to success.
To start this business, you’re going to need one essential piece of equipment: a tow truck. There are different types of tow trucks that are built today, so you’ll need to determine if you want a flatbed truck or a rear-hook truck. Some wreckers come equipped with cranes to remove 18 wheelers from the road while others will just handle the average family vehicle. You’ll need at least one truck and as your business grows, you’ll likely need to invest into a fleet of trucks.
Once you have the vehicle, you’ll be ready to follow these additional steps.
1. Protect your assets with your business structure.
A tow truck business should never be a sole proprietary business or a partnership. These business structures put personal assets at risk if there is an issue that could create litigation. If the hook slips and a client’s vehicle is damaged, do you want business funds paying for that or personal assets? Incorporate the business or file for an LLC to create the best structure.
2. Get the permits that are needed.
Many tow truck companies will have a yard where the vehicles that are towed are impounded. This happens when the tow is requested because the vehicle is in an illegal position. A secured lot can provide bigger profits, but it may also require specific zoning permits to legally operate. Other licenses and permits may also be required because you will be transporting damaged vehicles through urban areas at times.
3. Insurance is usually required before being allowed to operate.
Liability insurance is just one type of policy your tow truck business is going to need. Not only do the trucks need to have liability, your business needs to be covered by a general liability policy. You will also want to put collision coverage on your trucks. Additional coverage for the vehicles being towed may also be considered mandatory.
4. Determine a system of dispatch.
If it’s just you and your tow truck, then all you need is a cell phone on hand so that you can be dispatched to different job sites. If you have more than one truck or you’re incredibly busy on a regular basis, then a central dispatching system will become necessary to properly operate the business. This means having radios or other forms of instant communication available in each truck. Having GPS equipment in the truck can also help you to arrive on site the fastest way possible.
5. Penetrate the market.
A tow truck business can only survive if it is busy on a regular basis. To have a better share of the local market, you’ll need to start forming relationships with anyone who may work with disabled vehicles. Law enforcement agencies, automobile mechanics, and even fueling stations may all see vehicles that need a tow. Become a preferred partner, offer to mutually refer business, and you might just see some steady work. Consider partnering with companies like AAA or AARP to provide roadside assistance options as well.
6. Focus on the customer service.
The biggest problem that tow truck companies face is the customer service experience. Many clients are already having a bad day. Having a grumpy truck operator who’d rather be somewhere else creates a deeper negative experience that could affect your profits. Repeat business comes when a professional appearance and friendliness is consistently on display.
7. Set yourself apart.
Tow truck companies already have their names and phone numbers on the truck. They have fliers at repair shops, local restaurants, and sometimes even in churches. They have signs placed throughout the community to promote their work. Distinguish yourself by doing something different. You might even partner with an existing business and take on the extra work they receive, but can’t perform because they have too many calls.
Knowing how to start a tow truck business is pretty basic. Get a truck, know how to use it, then get the licenses and permits needed to legally operate. Follow these steps and you’ll be able to start making money in no time at all.
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