Dreaming of running your own agency? There are a lot of possibilities out there, from travel to advertising and marketing, to recruiting, SEOconsult ...
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.
$8,550 - $17,100
Time to build
1 – 3 months
$80,800 - $600,600 p.a.
$56,560 - $120,120 p.a.
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.
- Good Money – Nice revenue, low ongoing expenses
- Large Market – Cars are always going to break down
- Flexibility – Run the business from home
- Stiff Competition – Compete with the likes of AAA
- High Startup Costs – Tow trucks are expensive
Roadside Assistance Industry trends
Industry size and growth
- Industry size – The U.S. towing industry was worth $11.3 billion in 2022.https://www.ibisworld.com/united-states/market-research-reports/automobile-towing-industry/
- Industry growth – The U.S. 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 U.S.
- Number of people employed – There are 113,885 people employed in the towing industry in the U.S.
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.
- 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
- Breaker bar
- Air pump
- Lug nut removers
- Socket set
- Power inverter
- Tire plug equipment
- Battery analyzer
|Start-up Costs||Ballpark Range||Average|
|Setting up a business name and corporation||$150 - $200||$175|
|Business licenses and permits||$100 - $300||$200|
|Business cards and brochures||$200 - $300||$250|
|Website setup||$1,000 - $3,000||$2,000|
|Tow truck down payment||$5,000 - $10,000||$7,500|
|Tools||$2,000 - $3,000||$2,500|
|Total||$8,550 - $17,100||$12,825|
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
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.
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:
- 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 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: “Jim’s Bakery” over “Jim’s Cookies”
- 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 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: Brief overview of the entire business plan; should be written after the plan is complete.
- Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
- Product and Services: Describe your offerings in detail.
- Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
- Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
- Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
- Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
- Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
- Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
- Appendix: Include any additional financial or business-related documents.
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
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 ZenBusiness’s 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.
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 Licenses/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.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties. 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.
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. 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.
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.
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.
Some of your business will come from the casual online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
- Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
- Instagram: Same benefits as Facebook but with different target audiences.
- Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Schedule Now”. This can sharply increase purchases.
- Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.
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
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
- Post a video – Post a video about your roadside assistance services. Use humor and maybe it will go viral!
- Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
- Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
- Pay–per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
- Do a webinar – Share your roadside assistance expertise online with a video seminar
- Testimonials – Share customer testimonials about how your roadside assistance helped them
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.
- 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.
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: 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!
Roadside Assistance Business FAQs
You can start a roadside assistance business from home for about $8,500. Costs include a down payment on a tow truck, tools, and a website.
You can make $100 to $125 per tow, sometimes more, and you can charge up to $300 for some services. This can add up to several hundred dollars or more per day, so you can definitely make good money.
You may need various licenses and permits at the state and local levels. Check with your local governments for requirements or visit MyCorporation’s Business License Compliance page.
The typical charge for a tow is $75 for the truck hook-up and $2 to $4 per mile. Other services can range from $50 for filling up the fuel tank, to $300 for mobile mechanic services.
18 Agency Business Ideas
Published on August 11, 2022
11 Vegan Business Ideas
Published on August 11, 2022
If you’re a vegan looking for a business idea that aligns with your diet, you’ve got a lot of options. You could start a vegan bakery,restaurant ...
How to Start a Bank
Published on June 20, 2022
Banks provide people with a safe place to stash their money and a potential source of financing, along with a slew of other services. Afterexpanding ...