How to Start a Towing Business

Friday, December 5, 2014

How to Start a Towing Business

Towing is the process of coupling one object to another, so that one can be pulled along behind the other. The towing source (lead object) is usually a truck or other motorized land vehicle, but anything from waterborne vessels to tractors to animals to people can tow cargo. The coupling may consist of a chain, rope, bar, integrated platform, or some other means of keeping the two objects together while in motion.

A common use of the term is for moving a disabled or seized vehicle via a tow truck or "wrecker." However, any kind of secondary object, including cargo carriers hooked in a tractor-trailer combination, or carriers (trailers) hooked to small- or medium-duty vehicles via trailer-hitch, may be said to be an instance of towing. Many countries or industries have standards for carriers, lighting, and coupling for trucks and cars, to ensure safety and interoperability of towing equipment.

If you are looking for a good business venture that you can invest on, you might want to take a look at the money earning potentials of engaging in the tow business industry. Aside from the fact that there is less competition in the tow truck business, entrepreneurs that are engaged in auto towing businesses are more often assured of stable profits owing to the small number of towing companies that exist.

Depending on the needs of your community, a towing company can be a profitable business venture. Towing companies remove abandoned or illegally parked vehicles, transport stranded vehicles and remove vehicles involved in auto accidents. Towing companies typically have a variety of customers such as small-business owners, car dealerships, local government agencies and apartment management companies. Starting a towing company may require only one tow truck. As your business expands, so can your fleet of trucks.

If you want to start a towing business, the following information can prove to be helpful:

Things Needed

Business plan
Business insurance
Surety bond
Tow truck license
Tow truck and towing equipment
Lot to stow vehicles

Start up cost and requirements

You will need a license to operate a towing company. Remember however that you need to be patient in securing a towing truck business license because obtaining a towing license can prove to be difficult. This is because towing licenses are strictly regulated. People who are planning to invest in a tow truck business must also have at least $10,000 for a towing business start up capital. The starting capital for a towing company however can vary depending on your location and the type of operation you intend to have. In urbanized areas for example, you might need around $200,000 if you are going to purchase a tow truck and a towing license.

Operating a Towing Company

Starting a towing company will not guarantee you that people will automatically call for your towing services business services when they need help in towing vehicles. You must do something so people will know about your auto towing business company. It is therefore best if you can have a good marketing strategy so people will remember your towing business should they need the services of a towing company. You can post ads in local newspapers so people can read and know about you. It is also a good idea to contact companies that might need towing businesses to service them when they need to tow illegally parked cars in their vicinity. Towing business operators are also advised to come up with easy to remember names and phone numbers so people can easily recall their company when vehicle towing services are needed.
A towing business is a good business opportunity given the small number of competitors in the industry. If you intend to invest in a vehicle towing business, make sure that you have the necessary capital needed as start up cost for your vehicle towing business. It will also help if you have an effective marketing strategy so people can easily contact your towing business when they need auto towing providers.
It is always better to focus on a small part of your niche as the market has grown very big and it will be tough to compete with others when you are just starting and don’t have a specialized service. When I say specialized service then I mean either you concentrate on starting heavy duty tow trucks business, boat towing service, bike towing, etc. It is always advised to buy used tow trucks to start the business rather than going for new one. If you buy the used ones then you save on your budget and can use the extra money on advertising your towing business because end result depends on the number of hours you keep your tow trucks busy.

Towing Business Instruction:

Create a business plan to outline each phase of business development for a towing company. Write a business description, including the types of towing services you want to provide customers, in the first section. Types of towing services include emergency towing, dealership towing and commercial retail towing. List startup costs, equipment costs, labor costs, insurance costs and towing license costs in the second section. In the third section, create a marketing plan that includes ways to attract potential customers. Describe the roles and duties of management and employees in the fourth section.
Apply for a towing license by contacting your local towing and recovery board or department of motor vehicles. Register your business with the secretary of state's office and the county clerk's office that oversees the county where you plan to operate the towing company. Apply to the Internal Revenue Service for an employer identification number (EIN) by visiting IRS.gov. Use this number when filing all state and federal tax return documents.
Purchase business insurance, such as general liability, property, auto and workers' compensation insurance, from a licensed insurance provider. General liability and property insurance help pay for costs associated with lawsuits, damage to towing equipment or a legal settlement. You may also need to purchase a surety bond to help cover additional costs associated with a lawsuit or settlement. Surety bonds are also used to keep business owners honest when providing services to customers.
Purchase towing vehicles and equipment from local truck and auto supply stores or online. Visit used auto parts stores or junkyards to purchase items at a low cost. Purchase computer software to maintain accurate towing records, bookkeeping and invoicing.
Lease or purchase a parking lot or land to park vehicles after towing. Contact a commercial real estate agent to find a location that is large enough to park a variety of vehicles.
Market your services to businesses in your community. Attend business-networking functions and auto trade shows or visit local businesses in person. Types of businesses to contact include car dealerships, apartment management companies, small-business owners and local government agencies.

Tip

To protect business assets, purchase enough business insurance to adequately cover the costs of legal fees.

Warning

Obtaining a towing license may be difficult depending on the number of businesses applying. Many areas limit the number of licenses granted, to prevent too many towing businesses in one area. If you cannot obtain a towing license, you may be able to purchase an existing license from another towing company.

Reference

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Easy Tips and Ideas to Start Business

Although anyone can start a business, many people fail because of a bad product or improper research. If you want to start your own business, you can improve your chances for success before you even begin. In order to make your business successful, start strong and make sure that your idea will hold out for the long haul.

Have a Good Product

Ensure that you plan to sell something useful. Although you may think that your product is important or special, that doesn't mean the general public will agree. Ask friends, family and strangers what they think of your product. If they don't seem that interested, ask them why. With their suggestions, you can either improve the product or scrap the idea completely. According to Brad Sugars of Entrepreneur magazine, most small businesses fail because they sold a product that didn't have an adequate market. This also applies to small businesses that provide a service. A lawn-care business might be useful for part of the year in a northern state, but it is in-demand year-round in the south. Consider whether people will actually want to use your service and get constructive advice from those not afraid to give their opinion.

Research Local Businesses

Research local companies before starting up your own business. This will not only give you an idea of the amount of competition you will have, but it will also help you price your product or service. If you're looking to start a wedding photography business, you may find during your research that the market is over-saturated in your area. If not over-saturated, you should contact each business and ask them for a price list. Alter your prices so you can stay competitive with the competition in town. Researching similar local businesses will also help you decide where to locate your business location. Try not to start up a store or office close to another business of your type. If your small business is located away from similar business types, this will cause locals to choose you over businesses that are farther away from where they live.

Get Professional Advice

You may know someone who has started their own successful business. Ask him for advice and listen to his stories of how he started his company. You may gain useful advice on the good and bad ways to start a business. Local entrepreneurs can also introduce you to local product providers or advertisers that you may not have met without their help. Accept any advice with open arms, especially if the advice is coming from someone successful in the area.

How to Calculate Business Start Up Costs

Starting a business in no easy endeavor. It takes a great deal of research, perseverance and hard work. While sweat equity will make your small business more successful, you will most likely need real capital to get the business started. Before you start raising capital and/or investing your own funds, the first thing you need to do is determine the total start-up costs.

Step 1

Determine your costs of sales. For most small businesses this means inventory, the cost of raw materials, manufacturing equipment, shipping, packaging, and warehousing. However, not all businesses sell products. In this case, the cost of sales is primarily the direct labor involved in making the sale. For example, to open a small shoe business entails purchasing enough inventory ($10,000) to stock the store.

Step 2

Determine professional fees. Planning your business structure, i.e., limited liability corporation or general partnership, means hiring an attorney. There may also be the need to pay an attorney for help with establishing trademarks, copyrights, and patents. In this scenario, that puts total professional fees at an estimated $20,000.

Step 3

Determine technology costs. Technology can greatly reduce the cost of labor for small business if used effectively. Most small businesses require computers, printers, cell phones, website development, Internet access, software applications, information security, data storage, and outsourced information technology (IT) consulting. If the cost of technology is $10,000 to start, add an additional $5,000 a year for maintenance (hint: maintenance is not included in start-up costs).

Step 4

Determine administrative costs. This varies with business types and may include items such as business insurance, office supplies, product packaging, parking, rent, express shipping, desks, chairs, fax machines, phones, or anything else necessary to operate the business daily. A good estimate for start-up administrative costs would be $5,000 for the first six months.

Step 5

Determine initial sales and marketing costs. Now that you have your product, you need to let folks know about it. Sales and marketing costs generally include marketing materials for presentations, printing stationery, business cards, advertising, trade show events, and public relations. These initial sales and marketing costs can add up to $3,000.

Step 6

Determine the wages and benefits needed to secure a staff. This includes employee salaries, benefits, workers compensation, and payroll taxes. Let's put the cost of wages and benefits estimated at $20,000 for the first three months of business.

Step 7

Add all costs associated with starting the business for a total. Be sure to only include business start-up costs that will be incurred in the first three to six months of operations. For this example, the calculation is: $10,000 + $20,000 + $10,000 + $5,000 + $3,000 + $20,000 = $68,000.

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Friday, December 5, 2014