Tow truck as a business – profitability and nuances

Towing services, no doubt, are in demand around the clock at any time of the year. The automotive market is only growing, and this contributes to an increase in demand for repair and maintenance services for vehicles. After all, no one is safe from unpleasant situations on the road, and when a breakdown occurs, it is impossible to predict. And when the question arises of transporting the car to the place of repair or home, a tow truck comes to the rescue.

towing business

I must say that the car towing business can become a profitable undertaking with a stable income. It is not difficult to organize it. All you need is a small capital and a business plan with a clear sequence of actions. In order to weigh all the pros and cons and decide whether or not to open a business, let’s dwell on the pros and cons of a business.

Pros:

  • In the absence of a large amount, you can start with a minimum investment.
  • Stable demand for the service 24/7
  • Little level of competition
  • Ease of opening and running a business

Minuses:

  • Average payback period
  • Low profitability
  • Registration of a package of documents for a large-scale business and additional costs

How to start a car towing business

For a successful start, you need to develop a competent business plan with the following points:

  • Analysis of the market situation and competition
  • Target Audience Selection
  • Acquisition of a tow truck
  • Paperwork
  • Search for colleagues
  • Marketing activities
  • Let’s take a look at each question step by step.

Depending on the size of the starting capital and the locality, a business format is chosen:

Working alone involves the purchase of one tow truck and an independent search for orders. This option is attractive due to low investment, ease of maintenance of the vehicle and low monthly costs. But due to the load and the inability to cope with a large volume of calls, you have to refuse customers, losing them. And if the tow truck breaks down, you risk being left without earnings.

The organization of a medium-sized company involves the maintenance of 3 to 5 tow trucks, drivers and a parking lot . It will require large expenses, but also promises a good profit. In addition, it allows you to leave equipment in different parts of the settlement and arrive at a call faster.

The activity of a large company with a fleet of 10 tow trucks, an office, a parking lot, staff and a repair shop . This format requires large investments, as well as registration of a legal entity. The disadvantage will be the complexity in managing the enterprise and the need to open your own car service to service tow trucks. For a beginner who has not previously engaged in such activities, this option is risky.

Which format to choose is up to you. In any case, study the level of competition in the market for these services and move on.

Buying a tow truck

The main issue of business planning is the purchase of a tow truck. In his solution, again, they start from the initial sum, since:

  • a new tow truck will cost about 4-5 million rubles.
  • for a used one, an amount of 1.5 million rubles will be required .

You also need to decide on the type of tow truck. There are different models:

  • With a winch for the evacuation of vehicles weighing no more than 7 tons. The option is not suitable for transporting a car with an automatic transmission and locked wheels.
  • With a hydraulic manipulator for loading and evacuating cars in a faulty condition, after an accident, for extracting from a ditch, transporting new cars with blocked ignitions.
  • With a sliding platform for transportation of vehicles of different dimensions and tonnage weighing no more than 3.5 tons.
  • With a broken platform for transporting a variety of vehicles that can independently drive onto the platform and have been injured in an accident.

With partial loading for special equipment, trailers, buses, trucks.
Be sure to register the purchased tow truck with the traffic police, insure it under the OSAGO system, equip it with a GPS sensor and a mobile POS-terminal for the possibility of paying with a bank card. Also organize a platform of 70-90 sq. m. for parking or a place to check the technical condition of the machine.

With a small amount of capital, it is advisable to purchase a universal inexpensive tow truck with a broken platform . You can leave it in any convenient place.

And having a large amount, it is worth acquiring several types of cars. By doing this, you will reach a wide target audience and satisfy the needs of any client. Try to buy new tow trucks with a warranty service period, as used equipment breaks down more often, which leads to downtime and loss of a client.

Who are the clients

It is important to determine the target audience of coverage. Your clients may be:

  • Ordinary motorists in need of towing services
  • Owners of special equipment, construction companies , private entrepreneurs
  • Owners of ATVs, snowmobiles and others
  • Persons wishing to transport small-sized construction equipment, garages, change houses

To increase the circle of customers, you can offer related services: the sale of spare parts, on-site tire fitting , car diagnostics, mobile car service and others.

The cost of towing services will depend on the dimensions of the transported equipment, the complexity of loading and other factors.

Business registration

For official activities, you will need to register an individual entrepreneur or a legal entity in the form of an LLC with the tax office . To do this, you need to write an application and provide a copy of your passport, as well as pay a state fee.
Specified OKVED code: 49.91 on the transportation of various goods by means of transport. Preferred tax regime: according to the simplified tax system, easy to report and allows you to pay 6% of income or 15% of profit.

Carrying only light vehicles, no special documentation is required. For the business of evacuating trucks and large vehicles, you will need to obtain a license. Also draw up a contract for the provision of services for clients, in which specify the conditions, terms, amount of payment, and the responsibility of the parties.

Hiring

To run a business, you need a staff. If you run a business alone, you don’t have to keep employees. In the case of a firm, they hire:

  • drivers at the rate of one person per tow truck. It is obligatory to have a license of category B, C and a medical book
  • to receive orders, you will need a dispatcher, as well as a security guard for the parking lot, a manager and an accountant on an outsourced basis
  • for the repair and maintenance of vehicles will need an auto mechanic

To ensure round-the-clock operation, a schedule of 2-3 shifts is introduced, trying to provide high-quality service in a short time. You will need an office space of 30 sq. m., furniture, office equipment, computer. In order to save money, the office is located not in the city center, but in quiet areas, away from busy streets, but not on the basement floor. The main thing is to ensure uninterrupted mobile communications and the Internet for the continuity of orders.

Promotion of tow truck services

The success of a business directly depends on the number of customers and the volume of services, so marketing policy should be given special attention. The easiest way is to cooperate with the state traffic police, if possible. Also use the following options:

  • own website on the Internet, groups in social networks
  • placement of advertising on transport, forums for motorists, bulletin boards
  • distribution of leaflets, business cards, flyers
  • posting ads at the entrances of houses, “word of mouth”

Promote the business not only at the initial stage, but also during further work. This way you can attract and retain a customer.

Business Profitability

To assess profitability, let’s see how much money is needed at the start for a small enterprise:

  • Acquisition of two tow trucks 3 million rubles.
  • Organization of parking and transport insurance 250 thousand rubles.
  • Office equipment and rent 150 thousand rubles.
  • Paperwork, advertising costs 50 thousand rubles.

Total: 3,450 thousand rubles.

This is the average amount. For a single business on one used tow truck, the initial costs will be half as much. And, conversely, with a large-scale business, costs will increase significantly.

In addition to the initial investment, there will also be monthly costs: for paying salaries to employees, renting office space and parking, taxes, utility bills, and others. It turns out the amount of 200 thousand rubles . and more depending on the region.

Let’s calculate the expected income:

  • The cost of the service is on average 3 thousand rubles.
  • Number of calls 4-5
  • Monthly profit from two tow trucks 720-900 thousand rubles.

The amount of net profit is 520-700 thousand rubles.

That is, the payback is 6-7 months. It all depends on the size of the settlement. In a metropolis, even one tow truck is able to bring more than 900 thousand rubles, which will make it possible to recoup the investment in 3-4 months of work. And in a small town, the profit will be much less, respectively, the period will stretch to a year or more. If we talk about profitability, then it varies between 30-50%, which indicates a good indicator.

Business risks

Any activity is associated with certain risks. The tow truck business is no exception. Its specific risks include:

  • Competition with an incorrect assessment of the volume of the market supply of evacuation services. To minimize risk, carefully study the competitive market, pricing policy, business concept and target audience.
  • Violations by the company’s personnel: fines for drivers for non-compliance with traffic rules and damage to the car, dispatcher errors. To avoid it, carefully select the staff, apply liability measures for serious violations and encouragement for quality work, automate workplaces.
  • Downtime of equipment due to breakdown for the period of repair. The seasonality factor is practically absent here, as cars break down throughout the year. But the greatest demand falls on the period from October to April, and in the summer months it is slightly lower.
  • To increase the client base and demand, advertise services more actively, do not overcharge, provide high service. Starting small, try to expand the business as much as possible. Having recouped the initial investment, purchase a second tow truck and hire a driver. If capital allows, immediately create a serious enterprise that can cover the whole city with services.

In conclusion, I would like to emphasize the importance of a competent approach to organizing a business on a tow truck and a thorough study of the planned stages. When working for the future, do not expect quick results and easy solutions . Any business requires certain costs and efforts, which in the future will turn into prosperity and profit.

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