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How to Start a Towing Business

Written by:

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by:

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

How to Start a Towing Business

Fast Facts

Investment range

$18,000 - $66,000

Revenue potential

$60,000 - $89,000 p.a.

Time to build

0 - 3 months

Profit potential

$40,000 - $62,000 p.a.

Industry trend

Growing

Commitment

Full-time

We like to be on the move, zipping here and there, but the sad truth is that cars do sometimes break down. That’s why vehicle towing in the US is an $11 billion industry. It’s also a growth market, so if you enjoy driving and helping people out of tight spots, you could start a towing business, be your own boss, and grab a slice of this massive market. 

Starting any kind of business, however, takes a lot of work. The key is to obtain the right knowledge and avoid all the usual mistakes. Thankfully, you’ve come to the right place, as this step-by-step guide lays out all you need to know to launch a successful towing business.

Step 1: Decide if the Business Is Right for You

Starting a towing business requires time and effort. You need to fully understand what is involved before you decide if it’s right for you. 

Pros and cons

Pros

  • Fast and easy to start; no expertise required
  • Flexibility — can start from home
  • Cars break down, so demand is constant

Cons

  • Trucks are expensive, which may hinder growth
  • Need to be available around the clock

Towing industry trends

As the pandemic recedes, people are sure to be moving about more, which means more vehicle breakdowns and greater demand for towing. All of this means there is a great deal of opportunity for the entrepreneur. 

Industry size and growth

towing industry size and growth

Trends and challenges

towing industry Trends and Challenges

Trends in the towing industry include:

  • Higher probability of car accidents as more people return to onsite work
  • Advanced safety features in new cars

Challenges in the towing industry include:

  • Risk of accidents and injuries
  • Bad weather

What kind of people work as tow truck driver?

towing industry demographics

How much does it cost to start a towing business?

Starting a towing business costs between $18,000 and $66,000, averaging about $42,000.

The largest is of course the tow truck itself. A new tow truck will run you about $100,000, which means the down payment could be $20,000. But you might be able to find a used truck for $25,000, and pay half that amount upfront to take the keys. You might want to pay a visit to the Truck Paper

While it may not be absolutely necessary, getting your commercial driver’s license (CDL) is a good idea when starting a towing business, as you might at some point cross the weight threshold (26,000 pounds). Check with your state for details. You will also need to gain Light Duty certification from the Towing and Recovery Association of America, which requires at least 90 days of tow truck experience. 

Start-up CostsBallpark RangeAverage
Licenses and permits$300 - $1,000$650
Insurance $500 - $1,000$750
Marketing and advertising$750 - $1,500$1,125
Website$300 - $750$525
Software$100 - $250$175
Tow truck$15,000 - $60,000$37,500
Office equipment$750 - $1,000$875
Miscellaneous$300 - $500$400
Total$18,000 - $66,000$42,000

How much can you earn from a towing business?

towing business earnings forecast

The average cost per tow service is about $95, and after your expenses, of fuel, insurance, and marketing, you should have a profit margin of 70%. 

In your first your or two working as a solopreneur, you might respond to two service calls per day for six days a week. This would give you about $60,000 in annual revenue and a profit of more than $40,000. 

As your business gains recognition, you can expect to get three service calls per day, giving you annual revenue of $89,000 and a profit of nearly $62,000. At that point, you could save up, add another truck or two to your fleet and start making serious money. 

What barriers to entry are there?

The biggest barrier to entry is financing, particularly the buying of a truck, along with maintenance. You will also pay a high insurance premium every year to protect your assets from accidental damage and theft. 

Another barrier to entry is the stringent regulations, as you may need a permit from the state as well as your CDL and towing certification. This will require significant training and experience. 

The competition is also fierce in the towing industry as all businesses offer the same services and most will have more experience than your startup.

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Step 2: Hone Your Idea

develop a business idea

Now that you know what’s involved in starting a towing 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 towing 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 towing service that offers a mobile app. 

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as partnering with taxi and limousine services.

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

What? Determine your services

Vehicles break down at unexpected times. It may happen during your road trip or commute to work as well as in the parking lot or in your garage. You may also get involved in a road accident. You can’t do anything except call a towing company to come to your aid.

Towing companies use different types of trucks depending upon what and how they need to tow. The following are four common types of trucks and their common uses:

  • Flatbed Tow Trucks — These trucks are very common in the tow industry. They carry a long, flat, empty, and hydraulic bed on their back. A ramp is used to move up the vehicle on the bed.
  • Boom Trucks — Unlike conventional but unsafe hook and chain tows, boom trucks use slings or belt lifts to tow a car which is much safer. They have a telescopic crane fixed on a commercial truck chassis which is called a “boom”. Boom trucks use outriggers to stabilize the body while the crane lifts the vehicle.
  • Integrated Tow Truck — These trucks are designed for heavy-duty towing as they are self-loaders that are capable and stable. These are often used to tow buses. They are also used for repossessions.
  • Wheel-Lift Tow Truck — These trucks are equipped with a metal yoke which is used to hoist the rear or front wheels of the towed car. They also use a hydraulic system to ensure safe carriage of towed vehicles on a bumpy surface.

While the main service of a tow company is to move a vehicle from point A to point B, some businesses offer roadside assistance to maximize their revenue. These emergency roadside services include:

  • Flat tires
  • Dead batteries
  • Lockouts
  • Empty gas tanks
  • Other quick repairs

How much should you charge for towing services?

Tow truck service charges range between $2 and $4 per mile, depending upon your location. The average cost per tow is about $100, but can vary widely. 

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

You will mainly get calls from people who get into road emergencies and need to tow their vehicle to the nearest auto repair shop. You should also expect to get calls from the local police department, car clubs, service stations, auto auctions, and property owners to tow and move a vehicle. You could reach out to all these organizations and let them know of your services, and you could also contact hotels and other tourist accommodations, and look for related businesses on LinkedIn and Google Maps. 

Where? Choose your business premises

In the early stage of business development, you may want to operate your business from home to help you keep your overhead expenses in check. But as your business grows and operations intensify, you will hire workers for various job roles and may need to rent out a shop or office. 

You can 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
towing business idea rating

Step 3: Brainstorm a Towing Company Name

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 “towing” or “car towing”, boosts SEO
  • Name should allow for expansion, for ex: “Rapid Response Towing Services” over “Junk Car Removal Solutions”
  • A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

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 set 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 Tow Truck Business Plan

Here are the key components of a business plan:

what to include in a business plan
  • Executive Summary: Summarize your tow truck business’s goals, highlighting its services in vehicle towing, roadside assistance, and recovery operations.
  • Business Overview: Describe your business’s provision of tow truck services, including emergency towing, vehicle recovery, and roadside assistance like tire changes or jump starts.
  • Product and Services: Detail the range of services offered, from light-duty towing for cars to heavy-duty towing for larger vehicles, and additional services like lockout assistance.
  • Market Analysis: Assess the demand for towing services in your area, considering factors like traffic volume, accident rates, and partnerships with local businesses or government agencies.
  • Competitive Analysis: Compare your business to other local towing companies, focusing on your advantages such as response time, pricing, or specialized equipment.
  • Sales and Marketing: Outline your strategy for attracting clients, which might include online marketing, agreements with auto repair shops, or contracts with motor clubs.
  • Management Team: Highlight the experience and qualifications of your team, especially in areas like automotive services, business management, and customer relations.
  • Operations Plan: Describe the operational process, including dispatching, towing operations, vehicle maintenance, and customer service protocols.
  • Financial Plan: Provide an overview of financial aspects, covering startup costs, pricing strategy, and revenue projections.
  • Appendix: Include supplementary documents such as business licenses, insurance policies, or agreements with local businesses to 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

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 are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to towing. 

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 towing business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

types of business structures
  • 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.

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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 are completing them correctly.

Step 7: Fund Your Business

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

types of business funding
  • 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.
  • Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
  • 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 options, other than friends and family, for funding a towing business. You might also try crowdfunding if you have an innovative concept. 

Step 8: Apply for Licenses/Permits

Business Licenses and Permits

To run a tow truck business, you need to comply with a number of local, state, and federal regulations. Below are some of the licenses and permits that you’ll need to operate your towing business:

  • You may need to get a permit from the local municipality, state, and even from the highway department. Check with the relevant authorities to find out what permits you need to run a towing business.
  • The truck driver will most likely need to obtain a Class B driving license, giving legal permission to drive a vehicle weighing 26,000 pounds or heavier or tow another vehicle that weighs 10,000 pounds or less.
  • Private property permit will be needed if you are towing an illegally parked vehicle without the owner’s consent.
  • Indictment management permit will be needed to tow a vehicle without its owner’s consent at the request of law enforcement authorities.
  • Consent to tow permit will be needed to tow a vehicle with the consent of its owner.
  • Oversized vehicle permit will be needed if you occasionally tow a vehicle exceeding the permitted weight.

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 towing 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:

types of business insurance
  • 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

Launching a Business

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 consider using AutoRepair Cloud, TowManager, and MedinyX to easily communicate with customers, manage and keep track of inventory, allow customers to track the repair process, send quotes and invoices to customers, and more. 

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.

You can implement an online booking system on your website, making it easy for customers to request towing services directly from your site.

Your clients 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 different marketing strategies to help you attract local customers and grow your brand:

  1. Local SEO Optimization: Ensure your website is optimized for local SEO by including relevant keywords (e.g., “Towing services in [Your City]”) in your content, meta tags, and headings.
  2. Google My Business: Claim and optimize your Google My Business listing with accurate business information, high-quality photos, and customer reviews to improve local search visibility.
  3. Local Directory Listings: Get your towing business listed in local online directories like Yelp, Yellow Pages, and TripAdvisor to increase your online presence and reach local customers.
  4. Social Media Presence: Create and regularly update social media profiles on platforms like Facebook, Instagram, and Twitter to engage with your local community and share towing tips, updates, and promotions.
  5. Content Marketing: Start a blog on your website to share informative articles about safe towing practices, car maintenance tips, and local news related to your industry to establish your expertise and build trust with potential customers.
  6. Online Advertising: Run targeted online ads on platforms like Google Ads and Facebook Ads, focusing on local keywords and demographics to reach potential customers in your service area.
  7. Local Partnerships: Collaborate with local auto repair shops, insurance agencies, and car dealerships to establish referral partnerships and gain access to their customer base.
  8. Branding and Vehicle Signage: Invest in professional branding and signage on your towing vehicles to increase visibility while on the road and create a memorable brand image.
  9. Community Involvement: Get involved in local community events, sponsorships, or charity drives to show your commitment to the community and increase brand awareness.
  10. Online Booking System: Implement an online booking system on your website, making it easy for customers to request towing services directly from your site.
  11. Email Marketing: Collect email addresses from customers and use email marketing to send promotions, updates, and safety tips to keep your brand top of mind.

Focus on USPs

unique selling proposition

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 towing service 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 towing business could be: 

  • Fast towing, 24/7
  • We offer towing and much more! 
  • Full-service towing for your luxury car 

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 towing business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working as a towing truck operator 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 towing. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business. 

Step 12: Build Your Team

Building a Team for a New Business

You may not need to hire any employees if you are starting out small from a home-based office. But as your business grows, you will likely need to recruit full-time employees for various job roles, such as:

  • Marketing Lead
  • Drivers
  • General Manager

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 Towing Business – Start Making Money!

Running a Business

Roadside assistance service provider Agero says almost 70 million vehicles break down in the US each year, costing the economy more than $40 billion and posing road hazards that sometimes lead to fatal accidents. By starting a towing business, you would be clearing the roads of these traffic hazards and helping your community while earning good money at the same time. 

You’ll have to be mindful of the risks and make sure you have safety systems in place. Now that you’ve done all your business homework, it’s time to hit the road to entrepreneurship and start your towing business! 

Towing Business FAQs

What types of services can a towing business offer?

A towing business can offer emergency roadside assistance, vehicle recovery, long-distance towing, heavy-duty towing, motorcycle towing, and vehicle transportation services. Additional services may include battery jump-starts, tire changes, lockout assistance, and fuel delivery.

Is a tow truck business profitable?

The tow truck business is indeed profitable. You can expect to make around $40,000 in annual net profit as a solopreneur. However, starting a towing business will require a sizable investment since buying a tow truck could be extremely expensive. Given this, the return on investment may be low as compared to alternate business options that you may consider before pursuing this business venture.

Is buying a tow truck a good investment?

Buying a tow truck is regarded as a safe investment because it has great resale value. If your towing business is underperforming and you have decided to shut your operations, your business will undergo liquidation. The tow trucks will be sold in the second-hand truck market and a major chunk of investment will be easily recovered if the trucks are in good condition.

How much is insurance for a tow truck?

The insurance premium may range between 2% to 3%, but it will vary greatly depending upon your truck value, condition, location and insurance company. You may expect to incur $100 to $500 per month on tow truck insurance.

Where do tow truck drivers get paid the most?

Based on job listings on Indeed, the top five states where truck drivers get paid the most are Pennsylvania (PA), Illinois (IL), Nevada (NV), Texas (TX), and California (CA).

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How to Start a Towing Business