How to Start Towing Service
Towing service still remains untapped small business idea.
Provision of towing service is one of the business ideas that people still don’t pay much attention to and this baffles me a lot. Why does it baffle me? I have travelled on some major roads and there has not been any time I travelled that I did not see someone requiring towing service.
If you have not personally found yourself in a situation where you need a roadside assistance, you must have seen someone before. Those people that are into the provision of towing service understand that motorists need roadside assistance every day. It may be on a highway or in a street. When you need a roadside assistance and you are fortunate to get one, you may not actually be able to quantify what the person that renders the assistance did for you. If you look for assistance on the roadside, and none seem forthcoming, the option left for you is to look for a tow truck company that can provide you towing service.
The need for towing service usually arises as a result of vehicular breakdown. This can be caused by some factors such as malfunctioning of vehicle engine, loss of tyre when there is no extra, electrical faults or anything that can make a vehicle not to be able to move on its own. Towing service is also needed if a vehicle gets involved in an accident. It may even be that the vehicle is impounded. If a vehicle is impounded either as a result of traffic offence, tow truck will be needed even though the vehicle functions very well. What am I saying in essence? There is a market for towing service. Although there may be competition just like any other business, the competition level is reduced through specialization. The fact that you see two or three people providing towing services does not mean that they are competing with one another. The capacity of tow truck determines the type of vehicles they can tow. If the capacity of their tow trucks are not the same, one can say that they don’t serve the same market.
However, towing service is not all about money. Before you rush into the business, there are fundamental issues you need to sort out. If you are attracted to towing service because of money, you may soon discover that probably you are into a wrong business. So, what are those fundamental issues you need to thrash before starting a towing service business?
You need to understand that you will not have a specific work schedule. You don’t know when exactly a vehicle will break down neither do you know when a customer will give you a call requesting for a towing service. Therefore, you should always prepare and get ready for emergency calls. You should be prepared for some levels of inconvenience. Your job is not a 9-5pm type of job. People can even call you at the middle of the night. Therefore, you are to decide before hand whether you can do this type of business. Of course, you are not mandated to provide 24 hours towing service. But those people that actually make it big in rendering tow truck business usually go full length by offering 24 hours towing service to their customers. Put yourself in the shoes of your customers. If you call a tow truck company in a crucial time when you need their service and they decline, I know for sure that you will not like to have anything to do with such towing company again. If you are in a position to recommend a towing company to a friend, you will never mention such a tow truck company. May be, this is the main reason we don’t have much people in this line of business.
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If you know that you can do this type of business, let’s go straight to how you can start a towing service business.
Go for training
Towing service is not just about a tow truck pulling another vehicle. It is more than that. It requires skills. Therefore you need to go for training. You can enrol for courses specifically designed to teach people who want to start towing service business. I usually recommend this type of training as it is highly specialised. You will be trained by experts in the industry. Apart from this, you need ‘on the job’ training. Don’t rush into the purchase of tow truck. You need to work with someone who has been in the towing service for some time so that you can have hand on experience. If you can’t go for the first type of training I recommended, the practical training is a must. If you don’t have the required skills and experience, you will be faced with the risks of damaging your customers’ vehicles.
Register your business
You need to register your towing service business. This may be in form of sole proprietorship. In case you want to partner with another person so that you can raise enough money for the business, registering your business as a Partnership will be the right option. Alternatively, if you have money for the registration process and other incidental costs involved in forming a Limited Liability Company, you can register the business as a Limited Liability Company. This will help you limit the risk you might get involved to the amount you invested in the business without losing your personal property in case any aggrieved customer sues your tow truck company.
Prepare your business plan
Having a business plan will help you in planning for the direction your tow truck company will follow. Not having any plan in place will make your tow truck company vulnerable to failure. Your plan should cover all aspects of the business. You should also have a short term and long term plans for the business. Have a cash projection and this can even guide you on how much to charge your customers so that you will be able to cover your costs and still make profits.
Source for funds
Towing service is not among business ideas you can do without capital. You need money to kick start the business. That is why I suggested a Partnership type of business. If you can’t raise the required money alone, your partner can come into assistance. Your Partnership Deed may require that you share any profit made from your tow truck company according to the ratio of the capital contributed by each partner. The amount you will spend on the acquisition of tow truck will take greater chunk of your initial capital.
Buy a tow truck
Your area of specialization will determine the type of tow truck you will buy. If you want to provide tow service to taxis and light weight business, you don’t need a heavy tow truck. Because of cash constraint, you may decide to start your tow truck company just with one tow truck. As the business continues to grow and makes profits, you can plough back the profits into the business. This can be used to purchase additional tow trucks.
Obtain permit
Provision of towing service is highly regulated. Unlike normal transportation business, people cannot just wake up and say they are starting a towing company. You need to obtain permits and license to operate a tow truck company before you can commence one.
Obtain Insurance
You need to insure the tow truck. Besides, towing service comes with its own risks. You need to contact insurance company to advise you on necessary insurance you need to take so that you and your towing service business can be adequately covered. It is not uncommon to have a client’s vehicle got damaged in the process of towing the vehicle. Having insurance in place will ensure that your business does not suffer by reason of penalties which may arise as a result of any legal action your aggrieved customers might take against you.
Choose a location
You need to choose a particular location for your tow truck company. Of course, you may decide to operate from home but you should have a place where you can park your tow truck. If you don’t have enough space at home, you can rent an open space somewhere. You can pitch with road side mechanic if he has free space to accommodate your tow truck.
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Embark on marketing
Marketing is pivotal to the success of any company providing towing service. You should know how best to connect to your customers. One good way to connect to customers is by advertising on the internet. Having a website will help you ensure that your advert on internet is maximized. The adverts will help direct traffics to your website. People are constantly searching the internet for ‘tow truck near me’. Imagine the number of calls you will be receiving in a day if your tow truck company keeps coming up each time people search for ‘tow truck near me’. Another way you can advertise is by maintaining good relationship with roadside mechanics. Ask them to refer customers to you any time they require roadside assistance. With this approach, you don’t need to spend much to connect to customers. It is important that you have a dedicated number for your towing service business. Mobile phone number is preferable.
When your tow truck company begins to grow, you can add additional tow truck. This will necessitate that you hire additional driver to work with you. When your towing service business gets to this stage, you can have more free time for yourself.
SWOT Analysis of Towing Service
To help you further, below is the SWOT analysis of a tow truck business. From the analysis, you will be able to decide when provision of towing service is good for you
Strengths
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Weaknesses
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Opportunities
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Threats
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Strengths
The following qualities or attributes will help any business that is into provision of towing services maximize its potential for profit making.
Good reputation: If you have ever needed a towing service, you will know the importance of dealing with someone or company that is reputable.When you call some tow truck companies, instead of telling you that they are not readily disposed, they will give you all assurance that their truck is on its way coming. If you have a good reputation especially in the area of customer service, this will give you an edge over your competitors.
Reliable tow trucks: There are trucks and there are good trucks. Having reliable trucks will enable you to meet the needs of your clients that require towing service with speed without any fear of truck breaking down on the road. It will also help you to service more clients per day. This will enhance your revenue potential.
Different towing services: A tow truck company that is able to offer variety of towing services such as heavy commercial towing, flatbed towing, equipment towing and motorcycle towing will hardly experience slack period. However, this requires investment in different sizes of tow trucks.
Roadside assistance: Some vehicles may not actually need a towing service. They may just require a roadside assistance such a battery boosting /jumpstart service, fuel delivery or tyre change service. It may even be that they locked key inside the car and need someone who can help they out. Offering these additional services will not only promote your towing service; it is a good way of earning extra income.
Skilled manpower: Towing service is not just about one vehicle pulling the other. It requires some expertise for you not to damage the car or vehicle of your customers. Having skilled manpower will ensure the safety of your customers’ cars and this can eliminate undue legal action from aggrieved customers.
Alliance with mechanics and police: One of the ways you can promote your towing service is through collaboration with mechanics or traffic laws enforcing agents. Having a strong relation with them will make you enjoy referrals in case of any vehicular breakdown on the roads or any need to impound vehicles.
High Profits: Towing service is known for high margin. People that require towing service are more concerned about the safety of their vehicles. By the time you compare the cost of a car to the cost of towing it, you will be ready to pay whatever the tow truck company may charge you. Because people don’t need towing service at every time; tow truck companies usually like to exploit any opportunity that comes their way.
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Weaknesses
Having gone through the strengths that a tow truck company may probably have, if you don’t have any of them, then, it becomes your weakness. Besides, there are other weaknesses that are peculiar to tow truck business. These include the following:
Irregular cash flow: Income from towing service is not predictable. You don’t know when vehicle will break down. You can’t tell when accident will happen. So, this makes it difficult for tow truck companies to predict their cash flow.
Odd working hours: This is a major weakness about towing service. You can receive a call at any time of the day or night. Sometimes, the call will come when it is not convenient for you. If you cannot pay this price, probably, towing service is not for you.
Harsh working conditions: If want to engage in the provision of towing service, then be prepared to work, come sun or rain. You may need to enter ditch or bush to pull out a vehicle.
Huge investment: Tow truck business is not a business idea for beginners. It requires major investment especially. If you want to offer variety of towing services, this will require acquisition of different sizes of tow trucks.
Huge insurance and interest costs: A tow truck company must insure all its trucks. The insurance cost is a fixed overhead. It does not matter whether there is business or not. The same goes for interest payment. If you borrow to buy your tow trucks, payment of interest becomes an obligation. This can erode your profits.
Opportunities
Enforcement of traffic laws: There is no a day that you will not find people playing foul on traffic rules either deliberately or ignorantly. Unfortunately, they say there is no ignorance in law. The empowerment of enforcement agents to impound cars and vehicles that flout traffic rules is a big business opportunity for companies providing towing service.
Bad roads: Bad roads contribute significantly to the number of accidents we have in the country. When a vehicle moving at a top speed suddenly enters a pot hole, accident is inevitable. Of course, one man’s meat is another man’s poison. Accidents bring revenue to people that are into toying service. The more pot holes on the roads, the more likely there will be accidents on the roads. The more accidents on the roads; the more revenues that come to toying companies.
More vehicles on the roads: If the statistics about road accident is 0.01%, this means that as the number of vehicles on the road increases; the more vehicles that will be involved in an accident. We assume the same statistics, all things being equal.
High cost of new vehicles: The vehicles that usually develop faults or break down on the roads are mainly old vehicles. With the rising cost of new vehicles, people can’t afford to change their cars. This makes them keep using their existing cars until some of them become scraps. This situation is actually a business opportunity for tow truck companies.
New auto repairs centre: If there is a cluster of auto repairs companies being openned in your area, this means that you can expect a flow of traffic of broken down vehicles into the place. This can happen as a result of new zoning laws. You can quickly penetrate the market by forming alliance with the mechanics there.
Threats
Threats are those things that can make your tow truck business unsuccessful. It is good if you can quickly identify them. This will help you to develop strategies that will help you mitigate their effects on your business. Some of the threats are discussed below:
Competition: Every business will have competition but the level of the competition may differ. If the competitors surrounding your tow truck business are too many and you probably don’t have resources to compete with them, this can threaten the survival of your business. You may need to move away from such environment.
Government policies: The government policy that bans the importation of used cars that are above ten years old is not doing tow truck business any good. This means that we will have less vehicles breaking down on the road.
Government having their own toying trucks: Vehicles impoundments supposed to be a good source of business for tow truck companies. In a situation where government now acquires its own tow trucks to provide its own towing service, this makes toying business less attractive.
High Costs: High costs of new tow trucks coupled with high interest rate can kill tow truck business. With high purchase costs, this means that you will have a longer payback period. Also, the interest on loans becomes high. This can erode your profits. You can just be working for the banks.
Kidnapping: Globally, the rise in terrorism and kidnapping can be a threat to tow truck companies. If you provide towing service, you can receive a call at any time. But the danger is that you are not sure of the ingenuity of the call whether it is actually for business or otherwise. With this mindset, you may decline some jobs which are actually genuine. This can deny you many towing service opportunities.