How to Start a Tow Truck Company
Tow truck drivers need to be flexible to be successful, since they often are needed during odd times and in weather-related emergencies. With the proper insurance coverage and permits, tow truck drivers can haul stranded drivers out of snow banks, assist broken down motorists and repossess cars for financing companies. Take advantage of new software programs that can help guide you as you learn how to start a tow truck company.
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Instructions
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Expect to invest from $30,000 for a used tow truck to more than $65,000 for a new truck equipped with all the winches and platforms you need to tow any passenger car or small truck. Other initial expenses include about $2,500 to hire an attorney to file papers that incorporate your company and shield you from personal liability.
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Get a commercial drivers license (CDL) from your local Department of Motor Vehicles (DMV). In addition, some states require tow truck drivers to carry another driving license specifically covering the industry. The DMV can give you instructions on how to obtain the special permits. Display the license in your truck so law enforcement officials can easily see it.
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Obtain a tow truck license. License permit requirements and fees vary from state to state. The industry is highly regulated, and you need to have this license to receive any referral business from insurance companies, towing services like AAA and municipal accounts. Check with your Secretary of State to find out which department oversees the licensing process.
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Make sure you carry enough insurance to cover your equipment and the vehicles that you tow. Find an insurance carrier that specializes in tow truck insurance to get the coverage you need. Consider securing limited liability and property coverage. Include storage insurance if you run an impound lot or other facility.
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Invest in software designed for tow truck companies as you grow. Companies such as TowXchange and ProTow design programs that can help manage dispatch calls, provide online communications tools that can improve driver communications and process liens on towed vehicles. Interact directly with municipal customers through an online system that gives them access to your services.
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Tips & Warnings
Diversify your offerings by setting up relationships with car dealers and finance companies to provide repossession services.
Be prepared to pay higher premiums for insurance if a majority of your towing business is repossessions. For example, industry leader Progressive Commercial will not provide insurance to your company if more than 24 percent of your business is repos. Weigh the pros and cons of repo work, considering the risks and the potential profits.
