How to Start Your Own Tow Truck Business

How to Start a Tow Truck Business, Step-by-Step

1. Consider what kind of business you want to start

There are a lot of ways that you can make a living by towing. You can tow disabled cars, impounded vehicles, etc. So, take some time to consider what kind of work you want to do and who your ideal customer is. The number of possibilities and paths is endless. And you also have to consider if you’ll be pursuing any contracts and, if so, from whom. For instance, how to get towing contracts with insurance companies is something you should research and plan for.

You’ll also need to consider the type of tow truck you wish to operate. You might be asking yourself, how much does a tow truck cost anyway? Well, the price varies and depends on a number of factors. Refer to Tow Truck Insurance Rates for more information.

Then, you have to think about the expenses that come along with getting your business started. What will the overhead costs be? What other expenses will you have to consider – for example, licenses and permits? What types of tow trucks will you need to do the work you want to do? How much will the tow truck cost? And, of course, how much is tow truck insurance per month? When will you turn a profit? And how will you price your towing services?

For those curious about pricing, using a towing estimate calculator can help you determine fair rates and ensure profitability.

All businesses are not created equal, and this goes for your towing company. Partner with professionals who know your industry – for example, truck dealerships, funding companies, accounting firms, insurance agencies, and even a mechanic shop if you don’t have one. Pairing yourself up with people who know your business is smart business. They may be able to offer advice that can help you reduce costs.

2. Make sure that your business is official

You have to go through the process of making your business a legal entity when you start a tow truck business. When you do that, you’re making it all official, and you’re also shifting liability from you as an individual to the business itself.

Basically, what we’re saying is this: don’t operate under your own name. This is for a couple of reasons. First, it provides a layer of financial protection for you if, for some reason, insurance doesn’t pay out a claim. Second, it’s good marketing. People like doing business with businesses. Having a legal entity makes you seem more professional.

3. Get your taxes in order

Yep, you can’t avoid taxes.

You have to be prepared for the proper taxes before you start a tow truck business and hit the road. Make sure that you’ve got all your tax information sorted out. You may want to partner with an accounting firm or business tax professional. That way, you’re not accidentally leaving hard-earned money on the table or misunderstanding any complicated rules.

4. Open a business bank account and sort out your accounting

It’s a good idea to open a separate bank account for your business so that you can keep your finances organized. By opening a checking account when you start a tow truck business, you’ll keep your business finances and personal finances separate.

You’ll also have to organize your accounting. Keep detailed, thorough records of all of your expenses – and all of your income. This will help you when you have to file your taxes every year because everything will be easy to find and understand.

5. Check with your state’s Dept. of Transportation about licenses and permits

Each state has its own regulations for tow truck businesses. You’ll have to check with your state’s Dept. of Transportation to see what business licenses and permits you’ll need to legally launch your tow truck business. Getting the required licenses and permits is essential to having a proper tow truck business. Your DOT can help you get through the process of getting your paperwork, licensing, and permits on file.

Pro tip: Make sure the name of your company matches the name on your trucks, insurance, and DOT number (if you are getting one). All names must match.

6. Get tow truck insurance as you start your tow truck business

Insurance is a complex piece of your business, and it’s the second most expensive piece next to your equipment. It’s really important to be aligned with the right insurance company that knows what you need. You may not need all the various pieces of insurance unless you are doing a variety of towing operations (rotational, roadside, private, auction, etc.).

There are many different types of insurance for tow truck businesses – and there are many risks that you need to protect yourself from. Take a look at this overview of five common tow truck coverages:

Auto liability: If you’re at fault in an accident, your auto liability coverage can help you cover your legal expenses and your legal obligation to the other driver.

Bodily injury liability can help pay for the other driver’s medical bills.
Property damage liability can help you cover the costs of repairing or replacing the other driver’s car (or other property you damage in an accident).

Garage liability: This protects you by covering your liability if the services your business provides or its day-to-day operation cause someone bodily injury or property damage.
Physical damage insurance: Physical damage insurance can help you get your tow truck back on the road as soon as possible if it somehow gets damaged.

Collision coverage can help pay to repair or replace your truck if you’re in an accident or otherwise collide with something.
Comprehensive coverage can help pay to repair or replace your tow truck if it’s damaged by something other than a collision, such as fire, vandalism, an animal strike, or falling objects (i.e., trees). It can also protect you if your truck is stolen.

On-hook coverage: On-hook insurance can help protect you financially by covering the client’s car while it’s hooked up to your tow truck. It covers losses such as collision.
Garage keepers insurance: If you ever have care, custody, or control of your clients’ vehicles, garage keepers insurance can help protect you if those vehicles are damaged by fire, vandalism, storm damage, etc., while they’re in your care.

For those looking for budget-friendly options, researching the cheapest tow truck insurance can help you save money while ensuring adequate coverage.

7. Promote your business through marketing

Of course, your tow truck business can’t thrive unless it has customers. You have to get the word out there that you’re the best of the best – in other words, commit to marketing your tow truck business. The only way people will know you’re around is if they can see you in more than one place. Advertise! Research the best places and methods to promote your business in the most cost-effective way. The better you advertise, the more jobs you’ll likely get.

To raise awareness of your company and drum up business, launch a website. Use social media to establish an online presence. There are many, many people who need a tow truck business. Help them find you by creating a marketing plan.

Summing Up

So, hopefully, that gives you an idea of how to start a tow truck business. It takes some determination and hard work, but it’ll be worth it. The best part is that you don’t have to go through it alone – our tow truck insurance agents are here to help answer any questions you have about starting your business and about your insurance. We can even help you save money on your tow truck insurance. You can reach out to us with our online quote form or by calling us.