The tow truck business start-up cost you need to know

So, you thought of starting a tow truck business and you wanted to see the tow truck business start-up cost.

However, running a tow truck business is not as easy as it seems. If you decide to own a tow truck company, you need to plan your budget and your resources. At the same time, you need to be well informed on all costs related to towing businesses, as only in such a way you can make a profit. Specialized skills and licenses are also welcome, as well as experience in the transportation industry.

Tow truck businesses are based on sustainable business plans. Before you launch your own towing company, get to know the market and the clients you want to serve. You can opt for roadside assistance, repossession, and repair, municipal towing, or any similar niche.

Next, you’ll need to draft a solid business plan and budget, so you can determine how much financing you need. Once the loan is there, you can make all the important purchases to get your towing business on the move. Where and how you spend money will define your ROI (return on investment), so be prepared for excess and unforeseen expenses. Profitability starts when you learn where to cut costs for your towing business.

That being said, it is time to reveal the most important tricks to a successful towing business. A rough estimation is that tow truck businesses require an investment anywhere from $150,000 to $2,000,000, depending on your exact needs.

Here are the details:

The costs of owning a towing business

Buying a tow truck

If you are just starting, it may not be the best idea to get a brand-new truck. Instead, invest in second-hand vehicles, and you will only need $15,000 to $60,000. The next towing business investment will be to secure the necessary licenses.

Fuel

We can all agree that petrol is very expensive. A tow truck spends more fuel than an average vehicle, and usually performs multiple road trips per day. Therefore, consider these costs from the very beginning – fuel consumes even 30% of your total budget.

Of course, the fuel expenses will vary based on the tow truck or the mileage. Market price and fuel efficiency will also play a role in the calculations. What is worst, almost every tow truck runs on diesel and not on gasoline, which brings the expenses even higher.

Permits, licenses, and instance

Tow trucks need to be insured, and so does your business. Luckily, most tow truck insurance packages cover both business insurance and auto liability. You will be expected to pay between $4,000 and $15,000 a year, depending on the number of tow trucks you have or the towing services you provide.

If your towing business operates mostly in rural areas, you may be able to sink the costs. It is untypical for these areas to have high accident rates. If you’re in the repossession business, the insurance rate will grow again, the same as with repairs and similar add-on services. Get in touch with local insurance providers and compare their offers.

Next, check which permits and licenses are needed for your towing business. The local Department of Transportation can issue the documents for you, given that you comply will all requirements. These are the licenses needed by every towing business:

Indictment management permit which lets you tow vehicles based on low enforcement. With such a license, you won’t need consent from the owner.

Private property permit which lets your tow truck if demanded by the parking officer.

Consent to tow permit to tow vehicles without the owner’s consent

Oversized vehicle permits for tow truck businesses that tow bigger vehicles beyond a certain weight load.

Driver’s licenses – Class B for your drivers to operate the tow truck. They should be allowed to operate vehicles that weigh more than 26,000 pounds.

Marketing costs

No tow truck business is successful without a good marketing campaign. You’ll need to invest in the promotion to find new customers. Your best channels will be Google, motor clubs, and law enforcement.

Networking is also a good way to expand the customer base, and it requires little to no cost. If you want your towing business to be successful, you need to invest in internet marketing and reach out to as many viewers as possible.

Once you’ve defined the target market, it will become much easier to establish your brand and promote your towing business. You can even run a website and design a logo, and ensure clients recognize your tow truck when they see it.

Salaries for your employees

Towing services can not be exciting without employees. You need experienced drivers, so don’t forget to include their wages in your running costs.

Accounting services

A tow truck business also needs an accountant who will track its expenses and manage its finances. On average, accounting for towing services costs between $2,000 and $5,000 for full-time service.

Unforeseen expenses and repairs

In the tow truck business, you need to think of repairs in advance. There will be incidents and spontaneous issues, but maintenance will help you avoid many of them. You can’t rely on the fact that your tow truck will perform perfectly all the time.

Understanding the importance of these costs in advance is critical for your tow truck business. You need to take them into account when you set rates, and the tow truck business will secure your livelihood.

Software

Let’s not forget dispatch software. Many apps and providers help you stay organized and plan your trips and interventions. Some of them can even help you find clients, which makes them quite pricey.

Driver uniforms

It may not be the first expense that comes to mind, but we need to consider it. Tow truck drivers may not need the fanciest uniforms you can find, but you still want them to look professional.

A uniform also shows which tow truck company they work for, and that can be advantageous for your marketing strategy.

Overhead costs you didn’t count with

Last but not least, there are the things you didn’t predict at all. There is, for instance, the real estate mortgage for your tow truck office, as well as electricity and other utilities.

You’ll also need computers and hardware, and some nice furniture for the office.

FAQ about tow truck business start up costs

How much does it cost to start a tow truck business?

The cost to establish a tow truck business can vary significantly depending on a number of variables, including the number of tow trucks you plan to operate, where your business will be located, and the price of licences and permits.

Usually speaking, it might cost anywhere between $10,000 and $200,000 or more to launch a tow truck business.

What are the main expenses associated with starting a tow truck business?

Buying or leasing tow vehicles, acquiring licences and permits, purchasing insurance, paying for advertising and promotion, and paying employees are the key costs involved in starting a tow truck business (if applicable). Fuel, maintenance and repairs, and office supplies are examples of additional costs.

How much does a tow truck cost?

The type of truck, its age, and its condition can all affect the price of a tow truck. Used tow trucks can be bought for as little as $10,000 to $50,000, while new ones can cost anywhere from $50,000 to $250,000 or more.

Can I start a tow truck business with one truck?

Absolutely, you may launch a tow truck company with just one vehicle. It’s crucial to keep in mind that having only one vehicle may restrict your ability to serve several clients at once and your ability to make money.

What kind of insurance do I need for a tow truck business?

Liability insurance, physical damage insurance, and cargo insurance are among the common insurance policies needed by tow truck businesses. To give additional coverage, it is also advised that tow truck drivers have umbrella insurance and workers’ compensation insurance.

Do I need a special license to start a tow truck business?

To operate a tow truck, most states mandate that operators get a commercial driver’s licence (CDL). In some states, operating a tow truck business also necessitates obtaining an additional licence or permit.

How much does it cost to obtain a commercial driver’s license (CDL)?

Depending on the state and kind of licence needed, a CDL might cost different amounts. The price can often range from a few hundred to a few thousand dollars. Additional fees for testing and training could be added to the price of the licence itself.

What kind of maintenance costs should I expect for my tow truck(s)?

Depending on the age, condition, and frequency of use of the vehicle, tow truck maintenance costs can change. Regular maintenance costs like oil changes, tire rotations, and brake replacements as well as unforeseen expenses like engine or gearbox problems should generally be anticipated by owners.

How much does it cost to hire employees for a tow truck business?

Depending on a number of variables, including the type of employee, their degree of expertise, and the business’s location, the cost of employing personnel for a tow truck business might vary.

The majority of the time, owners are responsible for paying employee wages, payroll taxes, and benefits like health insurance and retirement plans.

How long does it take to break even and start making a profit in a tow truck business?

Depending on a number of variables, including the size of the company, the level of local competition, and the amount of cash spent, the time it takes to break even and start turning a profit in the tow truck industry can vary greatly.

With a tow truck business, it typically takes six months to many years to break even and begin turning a profit.

Ending thoughts on the tow truck business start-up cost you might have

As you saw, towing equipment and towing vehicles are not the most affordable business assets. Tow truck companies need serious investment before they hit the market, and we’re not only talking money. A good towing company requires time, effort, and contacts.

Given the cost of a towing company, the risk is not exactly irrelevant. You need to build your towing company with a business plan and think of everything in advance. Research the market and make smart decisions. Many tow truck businesses failed because they didn’t have a solid strategy in place.

Lastly, your towing company requires promotion and maintenance. It will not suffice to buy a vehicle and hire a tow truck driver. Plan your expenses, and the business will work for you. You will soon return the tow truck cost, and perhaps even expand your business.

If you liked this article on the tow truck business start-up costs, you should also check out this article about the cheapest states to form an LLC.