In many areas of North America, obtaining a license to start or operate an automotive towing business can be a frustrating task since auto-towing licenses are heavily regulated. Some operators of towing companies forego the license entirely and don’t provide towing services to the general public; instead, they only subcontract their services on an exclusive basis to car dealers and property managers. However, this can still be a risky venture given that it may be difficult to secure proper liability insurance for this type of towing operation.
The alternative to waiting to be awarded a towing license is to purchase one from an existing towing operator or company. Purchasing a towing license and tow truck in an urban area can cost you as much as $200,000 with no towing accounts in place. Overall, starting an automotive towing business can be a terrific and profitable business venture, providing a license can be obtained or purchased at a reasonable price.
Your primary customers will be people who are stuck in emergency vehicle situations, or businesses seeking to tow illegally parked vehicles. A strong marketing program–via advertising and word of mouth–will help potential customers remember your business in a jam. A catchy name and easy phone number will greatly help your business.
What are the steps to start a towing company?
- Plan your Business. A clear plan is essential for success as an entrepreneur.
- Form a legal entity.
- Register for taxes.
- Open a business bank account.
- Set up business accounting.
- Obtain necessary permits and licenses.
- Get Business Insurance.
- Define your brand.
- Establish your business by filing the appropriate paperwork with the state. Consider structuring your business as a limited liability company or corporation, because these legal structures provide a greater degree of protection of the business owner’s assets than a sole proprietorship will.
- Check with state regulators whether the wrecker company requires specific state licensure, and verify with county and municipal officials whether you need any special permits. Some jurisdictions require a zoning permit to open a secured lot for impounded cars, for example.
- Because of the risks involved with transporting damaged vehicles, towing company operators should carry liability insurance.
- Before getting into the business it is important to have an understanding of current cost/revenue estimates in the field.
New towing companies live or die based on their access to the local market. Make contact with local police jurisdictions to get your company on their roster of accident responders. Advertise with local repair facilities and arrange for mutual-referral arrangements. Put business cards in strategic locations, including the bulletin boards at auto-parts stores and local bars. Put your company in the local yellow pages and on the registries for AAA and other auto clubs.
- Establish a website that allows people to request a tow online.
We also recommend talking to a business attorney, particularly if you want to patent or trademark a name or idea for your business.
