When deciding to start a towing business the most important consideration is…where you will do it? Where will you start your business?
The choice of location when starting your business is important for many reasons. One of which is population density. You might believe that a smaller town is a better place to conduct business because competition is low. And because there’s just one other guy with a tow truck, you might believe you’ll be a shoe-in. But getting a foothold and doing enough business to make it worth your time and investment may prove difficult.
On the other side of that you may see the glut of competition in a larger metropolitan area as daunting, and assume there’s no room for you there. But could it be that the reason there are so many towing companies in that area is because that’s where the need is? And where there’s a need to be filled there’s opportunity.
But just because there’s opportunity you shouldn’t immediately rush in and stake your claim. Before you decide where you will operate your towing business you need to first do some information gathering. This will save you time, energy, and can also save you from wasting a whole lot of money.
Another consideration when starting your business, depending upon the business model(s) you’re looking at, is…What are the requirements to participate in that area? What are the barriers to entry?
To begin with, if you want to start a towing business in a certain city you need to find out what that city requires of tow company owners, and tow truck operators. Are you required to have a city business license? Do tow truck operators need to be certified to operate a tow truck? Is there a mandatory state, county, or city certification process?
And if your goal is to provide services to the police, say for non-consensual tows, what are the requirements for that? Do you need a minimum number of trucks and employees? Do you need any other special licenses? Do you need to have a USDOT number? Will your drivers be required to have more training? Do you need to have a commercial lot within the city limits? Are you required to operate 24 hours per day? All of these questions must be asked before you decide where to set up shop.
And after you’ve answered all those questions you then need to turn your attention to investigating opportunities in under-served markets.
Just because you perceive there to be an excess of tow trucks in an area doesn’t make it so. And even if the number of towing companies in an area is high, that fact does not mean that they have all the business sewn up. A tow truck operator can do much more than just provide services to the police. There’s Private party impounds, motor club work, equipment moving, salvage cars, repossessions, repair shops, cash calls, and more. And…those who you see as competition may not see the opportunities that a fresh pair of eyes can.
Once you’ve done the work of knowing what’s required to operate in a certain area and have determined what type of business model(s) you believe would work best in that area, you can then begin to get a feel for how much of an investment you’ll be required to make. You will know what type of truck or trucks are necessary, how many full-time employees you’re required to have, what type of licenses and insurance are required, whether your drivers need to be certified or not, and if you’re required to purchase real estate to operate in that market.
Say for example you want to operate in San Francisco but the barriers for entry in that market include a requirement that you purchase commercial real estate, be available 24/7, have 5 full-time drivers, and have the ability to move vehicles up to 80,000lbs. And these requirements are based on your choice of business model. That’s quite a large investment. And…depending upon your expected return on that investment, you may or may not decide to operate there.
So before you rush out and buy some trucks, do a little leg-work. Before you decide where you want to operate, investigate what’s required in that area and exactly what type of business model will work best for you. This can not only save you time and money but also help you make a lot more money.