How to Start a Towing and Recovery Business

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Starting a towing company seems straightforward in theory. All you really need is a tow truck, and you're good to go, right? In reality, you'll need to spend some time understanding the laws that govern the towing industry in your state, obtaining the right permits and getting appropriate liability insurance. You also need to create a strategic plan that allows your new company to compete with established towing providers by gaining contracts and attracting consumers.

The great news is that none of these tasks are beyond your capabilities. Yes, starting a towing and recovery business requires some effort, but what business doesn't? You're probably interested in starting a towing company because you already have experience as a tow-truck operator, which means you know how to troubleshoot and problem solve on the spot. These same qualities can help you make business decisions when starting a towing company.

What Kind of Towing?

If you're just starting a towing company, you might start with just one or two tow trucks so that you can maximize your revenue and reinvest in your company over time. The size of your company and the type of tow truck you have both mean that you might want to limit yourself to just one or two types of towing in order to establish your brand and build your reputation within that niche.

You can choose to offer consensual towing to vehicle owners who break down and need their car brought to an auto shop; nonconsensual towing for private property owners; government towing for any towing needs that occur on government property, including streets; repossession towing for private lenders; and emergency wrecker towing for either normal or oversize vehicles that need to be hauled to a junkyard.

Nonconsensual towing in particular requires more overhead fees because most states require tow companies holding these permits to have a storage facility for impounded vehicles, and you might not have the capital to afford a property right away.

Starting a Towing Company With Contracts

Depending on the type of towing you want to offer, you can contract with different agencies to get more work. For example, you can become a AAA towing provider in order to pick up jobs from AAA members in your area, or you can contract with your local government to assist in towing stalled, broken-down or wrecked vehicles from city and county streets.

Forming a professional working relationship with businesses even without a formal contract is also beneficial for towing companies. Auto shops can recommend you to customers who need to bring in a vehicle for repair, for example. As you start your towing company, be prepared to spend any down time networking with business owners and seeking opportunities to contract with agencies.

Advertising Your Business to Vehicle Owners

Of course, vehicle owners themselves represent a large customer base for your towing business as well. Make sure they have an easy time discovering your company when they need towing by having a strong presence both online and in print. As you set up your towing company, take some time to allocate part of your budget toward marketing and advertising. When these campaigns are successful, they pay for themselves.

A portion of the population still opens the phone book to look up service providers, so you should ensure that your towing company can easily be found, and you should choose a large premium listing if possible. However, most people now turn to Google for all their queries, so you not only need to have a website, Facebook page and Google My Business page but also a way to put your business's name at the top of the list of search results ahead of competing tow companies. This can be achieved through paid advertisements or search engine optimization.

A long-term strategy involves building your brand reputation and recognition until your company name becomes practically synonymous with towing. In other words, when people need towing services, they already know your company exists and will seek out your contact information directly. TV, radio, print and billboard advertisements can accomplish this marketing strategy along with digital marketing techniques such as email newsletters or social media.

Registering Your Business

Planning your marketing strategy (even if your only plan for now is to outsource those tasks to a marketing agency) and calculating a budget are important steps to take before you officially decide that starting a towing company is right for you. Once you do decide to make it official, the first thing you need to do is register your business.

Do this on a state, local, and federal level to make sure you are fully prepared for tax season. The IRS needs to know about your new business in order to issue you an employer identification number, so visit the IRS website to start the process. Your state will also collect business tax and so will your city or county. Registering your business at any level typically involves completing a simple form and submitting a fee, and failing to register your new towing company can result in fines or penalties.

Protect Your New Towing Company

You've probably spent a lot of time imagining the positive things that can occur as a result of your new towing company, namely the fact that you'll be making money while enjoying your work. It's time to also think about what can go wrong so that you're adequately protected. Each time you tow someone's vehicle, there's a risk of damage occurring while it's in your care. You don't want to have to pay out of pocket for that damage or be sued for more than your business is worth.

Therefore, once you've registered your business for tax purposes, it's wise to incorporate your towing company to minimize your personal liability and risk. This keeps your personal assets off the bargaining table in the event that your business gets sued.

In addition, you need robust liability insurance for starting a towing company. Talk with an insurance agent and research your state's laws to ensure you have the minimum liability coverage expected of a towing company. In particular, nonconsensual towing places you in the direct path of unhappy vehicle owners, so make sure you're well protected if you engage in this type of towing.

Understanding Your Local Towing Laws

Finally, you need to take some time to research and understand your local towing laws and how they will affect your business. You may need to obtain particular permits each year if you want to engage in nonconsensual towing or oversize towing.

There may be certain procedures you are expected to follow depending on the circumstances surrounding the towing, such as moving a wrecked tractor-trailer to the nearest safe place for dismantling. Regulatory tariff caps are also common in many states or municipalities, affecting how much you can charge for certain types of towing or vehicle storage.

Contact your state's department of transportation for full and up-to-date information regarding the local towing laws. You may also consider joining a local towing association to easily stay informed of any changes to laws affecting tow companies and to ask a knowledgeable and successful group of towers any lingering questions you have about operating a tow company in your state.

References

About the Author

Cathy Habas specializes in marketing, customer experiences, and behind-the-scenes management. Cathy has contributed to sites like Business and Finance, Business 2 Community, and Inside Small Business. She served as the managing editor for a small content marketing agency before continuing with her writing career.