How to Start a Roadside Assistance Business

We love our cars, but sometimes they break down and leave us stranded. You might be surprised to learn that roadside assistance is an $11 billion industry, and still growing. 

If you’re good with cars, now’s a great time to start your own roadside assistance business, help out people in trouble and grab a slice of this massive market. 

You’ll need a bit of business savvy, though, to be successful. Luckily, you’ll find everything you need to know in this step-by-step guide, which will put you on the fast track to roadside entrepreneurship.

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a roadside assistance business has pros and cons to consider before deciding if it’s right for you. 

Roadside Assistance Industry trends

Industry size and growth

• Industry size – The US towing industry was worth $11.3 billion in 2022.((https://www.ibisworld.com/united-states/market-research-reports/automobile-towing-industry/))
• Industry growth – The US towing industry has grown at a 5.5% annual rate the last 5 years.((https://www.ibisworld.com/industry-statistics/market-size/automobile-towing-united-states/)) 
• Number of businesses – There are 47,618 towing businesses in the US.
• Number of people employed – There are 113,885 people employed in the towing industry in the US.

Trends and challenges

Trends in the roadside assistance industry include:

• People want greater convenience through mobile apps on which they can order roadside assistance, presenting an opportunity for the tech-savvy entrepreneur.
• Mobile fuel delivery is growing in popularity, presenting an opportunity for roadside assistance companies to expand their services.

Challenges in the roadside assistance industry include:

• Physical danger is a constant problem, with an estimated 60 tow truck drivers killed on the roadside each year. 
• Rising insurance and fuel prices are cutting into the profit margins of roadside assistance businesses.

Demand hotspots

• Most popular states – The best states for roadside assistance businesses are Rhode Island, Vermont, and New Hampshire.((https://www.zippia.com/tow-truck-driver-jobs/best-states/))
• Least popular states – The least favorable states for roadside assistance businesses are Florida, Texas, and Louisiana.

What kind of people work in Roadside Assistance?

• Gender – 91.3% of tow truck drivers are male, while 5.5% are female.((https://www.zippia.com/tow-truck-driver-jobs/demographics/))
• Average level of education – The average tow truck driver is high school educated.
• Average age -The average tow truck driver in the US is 48.2 years old.

How much does it cost to start a roadside assistance business?

Startup costs for a roadside assistance business range from $8,500 – $17,000. The main expenses are for the down payment on a tow truck and tools. You can also take online courses and learn to be a tow truck driver in just 2 weeks for about $100. 

You’ll need a handful of items to successfully launch your roadside assistance business, including: 

• Battery pack
• Gas can
• Floor jack
• Jumper cables
• Pull up lockout tool
• Lockout kit
• Mallets
• Breaker bar
• Air pump
• Lug nut removers
• Socket set
• Power inverter
• Screwdrivers
• Tire plug equipment
• Battery analyzer

How much can you earn from a roadside assistance business?

The average price of a tow is about $110, which includes a $75 hook-up charge and $2-$4 per mile. Other services might cost from $50 to $300. Your profit margin after fuel and insurance should be about 70%.

In your first year or two, you could work from home and respond to two calls a day, bringing in more than $80,000 in annual revenue. This would mean over $55,000 in profit, assuming that 70% margin. As your business gains traction, the daily number of roadside services could climb to 15. At this stage, you’d add trucks, rent commercial space, and hire drivers and other staff, reducing your profit margin to 20%. With annual revenue of $600,000, you’d make a tidy profit of $120,000.

What barriers to entry are there?

There are a few barriers to entry for a roadside assistance business. Your biggest challenges will be:

• The costs of a tow truck and tools
• Standing out and attracting clients in a saturated market

Related Business Ideas

If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a roadside assistance business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research roadside assistance businesses in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a 24-hour roadside fuel delivery service. 

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as charging batteries or changing tires.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

Your services will depend on your skills and equipment but could include:

• Towing
• Dead battery jump start
• Tire changing
• Lockout assistance
• Fuel delivery
• Mobile mechanic services
• Battery replacement

How much should you charge for roadside assistance services?

The price of towing is generally a $75 hook-up fee plus $2 to $4 per mile. Prices for other services range from $50 to $300. Your ongoing expenses will be for fuel and insurance when you’re working as a solopreneur, so you should aim for a profit margin of about 70%.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be extremely broad. You should spread out your marketing to sites like TikTok, Instagram, Facebook, and LinkedIn. You could also go to your local police department to get added to their referral list. 

Where? Choose your business premises

In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. Find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Roadside Assistance Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “roadside service” or “roadside assistance”, boosts SEO
• Name should allow for expansion, for ex: “Roadside Rescuers” over “Towing Titans”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Roadside Assistance Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Present an overview of your roadside assistance business, detailing the services you will provide and how you plan to quickly and efficiently assist stranded motorists.
• Business Overview: Describe the scope of your roadside assistance services, which could include emergency towing, tire changes, fuel delivery, and lockout services.
• Product and Services: List the specific services you offer to drivers in need, emphasizing any unique offerings like on-the-spot repairs or 24/7 availability.
• Market Analysis: Analyze the demand for roadside assistance in your chosen area, considering factors like traffic volume and vehicle ownership rates.
• Competitive Analysis: Identify other roadside assistance providers and highlight how your service will be faster, more reliable, or more affordable.
• Sales and Marketing: Outline how you will reach potential customers, perhaps through partnerships with auto insurers, local advertising, or digital marketing strategies.
• Management Team: Introduce the team behind the business, focusing on experience in automotive services, customer service, and operations management.
• Operations Plan: Detail the logistics of service delivery, including dispatch operations, fleet management, and response time targets.
• Financial Plan: Summarize the financial aspects such as startup costs, pricing strategy, projected revenues, and profitability timelines.
• Appendix: Include supplementary documents like contracts, service protocols, or affiliations with auto repair shops that support your business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to roadside assistance businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your roadside assistance business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Form Your LLC

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a roadside assistance business. You might also try crowdfunding if you have an innovative concept. 

Step 8: Apply for Roadside Assistance Business Licenses and Permits

Starting a roadside assistance business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your roadside assistance business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as Tracker, towbook, or Beacon, to manage your dispatching, costs, truck inventory, invoicing, and payments.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial. 

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful digital marketing strategies for your future business:

1. Local Partnerships: Forge alliances with local auto repair shops, gas stations, and car dealerships to establish a network of referral sources, offering them exclusive discounts for their customers.
2. Fleet Programs: Target businesses with vehicle fleets by offering customized roadside assistance packages, providing cost-effective solutions for companies looking to ensure their vehicles are always operational.
3. Social Media Campaigns: Leverage social media platforms to share engaging content such as quick roadside tips, success stories, and time-limited promotions, creating a community around your brand.
4. Branded Service Vehicles: Ensure your roadside assistance vehicles are prominently branded, turning them into rolling advertisements that attract attention and instill confidence in potential customers.
5. Customer Loyalty Programs: Implement a loyalty program rewarding repeat customers with discounts, free services, or exclusive perks, encouraging them to choose your service consistently.
6. 24/7 Call Center Visibility: Highlight your 24/7 call center in marketing materials, emphasizing the immediate availability of assistance and instilling trust in potential customers.
7. Geo-Targeted Online Ads: Use online advertising platforms to target specific geographic areas, ensuring that your ads reach drivers in locations where your services are most needed.
8. Discounts for New Movers: Partner with real estate agencies to offer special discounts to individuals who have recently moved to the area, creating a positive impression during their transition.
9. Community Events Sponsorship: Sponsor local events, fairs, or sports activities to increase brand visibility, and consider offering on-site assistance or workshops to showcase your expertise.
10. Customer Testimonials: Showcase satisfied customer testimonials on your marketing materials and online platforms to build trust and credibility, demonstrating your track record of reliable service.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your roadside assistance business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your roadside assistance business could be: 

• Back on the road in 90 minutes, guaranteed!
• We’ll fix your tire blowouts, lockouts, dead batteries, and more
• Comprehensive roadside assistance available 24/7

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a roadside assistance business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in roadside assistance for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in roadside assistance. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a roadside assistance business include:

• Tow Truck Drivers – tow services, other vehicle services
• Dispatcher – take customer calls, dispatch drivers
• General Manager – staff management, accounting
• Marketing Lead — SEO strategies, social media 

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Roadside Assistance Business – Start Making Money!

Few things are worse than being stranded on the side of the road. Unless it starts raining. But you could be the hero who swoops in to save the day with your own roadside assistance business. You’re off to a great start with all the business savvy you’ve learned here, now it’s time to hit the road and start building your roadside assistance empire!