Operating Expenses

Expenses

Now that you have a rough idea of the possibilities with regard to income you need to continue your investigation into the towing business. To determine if this is a good fit for you, you’ll need to know what recurring expenses you’ll have on a monthly basis.

With every business there are two sides to the profit equation; Income and Expenses.  Obviously you want to have more money coming in than going out and you do that by either spending less or selling more or both.

Before we go further we’re going to establish certain assumptions:

  1. All numbers here are hypothetical and are dependent upon your circumstances.
  2. You’re an individual with no employees.
  3. You operate one tow truck, wrecker or carrier it doesn’t matter.
  4. You either operate out of your home or an existing business that has another source of revenue.

These expenses do not include any amounts for overhead such as real estate mortgage, rents, electricity, trash, and other expenses that go along with an office, garage or storage facility.  If you run this business out of your home you’ll need to check with the authorities to be sure you’re operating within the rules.

The average costs of running a one-truck operation will vary dependent upon your choices.  You’ll obviously have higher monthly mortgage and increased insurance payments if you finance a new truck.  On the other hand, purchasing a used tow truck will cost less up front but it may eat you up in repair bills.  The choice is up to you.

Recurring Monthly expenses for a towing business can include:

Expenses

Monthly

Tow truck mortgage $1,288 ($80,000 truck financed for 6 years at 6%)
Fuel $1,282 (220 calls @ 20 miles each & 13mpg with $3.79 gal/ diesel)
Insurance $300 (high deductible)
Repair Bills $500 Variable depending upon many factors (age of truck/ upkeep)
Advertising $500 Variable but expect to spend at least
Phone $100
Damages $300
Uniform $75
Miscellaneous $50 Ticket Book and Office Supplies

This list doesn’t include any expenses you’ll pay annually such as Licenses, taxes, subscriptions, and dues and you’ll make other discretionary spending choices when it comes to training and upgrading equipment throughout the year.


 

9 thoughts on “Operating Expenses

  1. Pingback: Cold Calling Paranoia — The Business of Towing

    • Marlin, yes I think that’s a good idea. If you don’t know how much it costs to operate your truck you don’t know how to properly charge, you don’t know how much money you’re making, and for some, the true cost of running their tow truck isn’t realized until they’re required to replace an engine or transmission. Good subject. I’ll work on it.

    • Yes. You only need one truck to start working for motor clubs. In fact I wouldn’t buy a second truck if the revenue you receive is only from motor clubs.

  2. I have over 13 years in the industry and am thinking of going out on my own however I work for a large company now and I know the overhead is insane. As a 1 man operation is it possible to make a decent living without completely running yourself into the ground?

    • Dave
      I talk to towers around the country and many of them are 1 & 2 truck operations. Yes it is possible to make a very good living without running yourself into the ground. But you must do it right. Which means…use motor clubs as a tool to leverage the exposure you get from working for them to build relationships with repair shops. Capitalize on the 4 main channels that customers use to find a tow truck, Google, Motor Clubs, Referrals, and Law Enforcement. Good luck and let me know if I can help. http://thetowacademy.com/about/

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