Do you want to start towing business?
Do you want to start a towing business? Well, this business has so wide scope and opportunities, that you need to plan wisely before initiating it. Basically, a towing business is based on removing the impaired or inoperable, or illegally parked vehicles from the road. Sometimes, special types of tow trucks are also used to remove the equipment and illegally kept cargos from the road. The towing business for roadside assistance is often needed as during the traffic hours, undesired vehicles or property on the road can cause inconvenience and even accidents on the roads. So, if you are looking for how to start a tow truck business, you must decide first whether you want to buy and run a tow truck by yourself, connect to a franchise or want to organize a number of trucks to start your own business. After taking the decision, you have to devise a detailed business plan covering all the details. In case, you need assistance on how to start your own roadside assistance business, you can take help from this sample business plan for a tow truck business startup named, ‘Texas Towing’.
2.1 The Business
Texas Towing Company will be located at a 10-minute drive from SeaWorld, San Antonio, a rich colonial city in Texas. Texas Towing will be, a registered and licensed company owned by Michael Finney, with towing trucks operating in the whole city. All the trucks will be kept in the best condition for working on urgent basis, and all the drivers will be well-trained to resolve common technical issues before provided with a CDL license. Texas Towing business will be based on moving emergency, impounded, inoperable or improperly parked vehicles from the roads throughout the city, timely and efficiently.
If you are going to start a roadside assistance business, you will all be dependent upon the work efficiency of your drivers. So, the management is the core concept, upon which your whole towing service depends. Michael has been associated with the automobile industry for more than 5 years, after doing a pervasive research on how to start a towing business, he has decided to manage the business by himself by purchasing trucks and employing drivers.
Before thinking about how to start a towing company, you should know the category of the people will need to avail your service. Our major customers will be the traffic policemen, road district officers, and the local residents of the city. There can be various phenomena when residents and road users will require our services, for instance, their vehicle can get out of order in the mid road, run out of gas or they may have accidentally locked them up in their own property!
2.4 Target of the Company
Our target is to provide fast and incomparable service to the inhabitants of San Antonio. Our main business targets are summarized in the following column chart.
3.1 Company Owner
Michael Finney will be the owner of the Texas Towing. Michael has been working in vehicle-related industry for more than 5 years. His two-year successful experience as a senior manager of a truck transport business and his friendly affiliation with all his employees has made him passionate enough to start his own business.
3.2 Why the Business is being started
Michael has excellent management skills, which he wants to devote to a profitable business. He has studied about many businesses and finally found starting a towing business, the most suitable for him. San Antonio is the seventh most populous city in the United States, that’s why Michael has chosen this as his marketplace, as the need to keep streets and roads clear for the incoming traffic is more in populous areas. Moreover, the larger the audience, the more will be the requirement of a towing service, and the more profit you can generate.
3.3 How the Business will be started
A large building with a wide parking facility will be taken on rent, company’s office will be established in the same building. The business will be licensed and registered by the state government, giving a 24-hour service to its customers. After doing a great research on how to run a successful towing business, Michael has understood the importance of the efficiency and dedication of the staff needed for running the business. Therefore, he has decided to hire and train his staff who will be solely responsible for the success of his startup, one month before the launch. Telephones, record registers, office furniture, computer systems and other inventory will be bought for running the business. The startup requirements are as follows: The detailed startup requirements and expenses are given in the table below.
|Research and Development||$32,750|
|TOTAL START-UP EXPENSES||$187,300|
|Other Current Assets||$232,500|
|Start-up Expenses to Fund||$11,875|
|Start-up Assets to Fund||$15,000|
|TOTAL FUNDING REQUIRED||$0|
|Non-cash Assets from Start-up||$18,750|
|Cash Requirements from Start-up||$0|
|Additional Cash Raised||$18,750|
|Cash Balance on Starting Date||$21,875|
|Liabilities and Capital||$0|
|Accounts Payable (Outstanding Bills)||$0|
|Other Current Liabilities (interest-free)||$0|
|Additional Investment Requirement||$0|
|TOTAL PLANNED INVESTMENT||$695,000|
|Loss at Start-up (Start-up Expenses)||$313,125|
|TOTAL CAPITAL AND LIABILITIES||$251,875|
Services for customers
Your services will mark your position in the market, if you want to enhance or grow your business, you must upgrade your services timely according to the market demand. This sample business plan will help you for starting your own tow truck business, and determining the services you can provide. Texas Towing will provide the following services to its customers.
- Roadside Assistance: Probably you will be worried if your car has run out of gas in the middle of a busy road, or has locked up in such a manner that you are unable to move it. Rest assured if you are in San Antonio, as we will be providing roadside assistance in the whole city 24 hours a day. Our drivers are trained to fix the problem in a very few minutes when it is possible to repair the vehicle on the road. Otherwise, our tow trucks will be helpful in moving your vehicle and saving others from the inconvenience or possibly an accident.
- Long Distance Towing: We have special flatbed tow trucks to carry your vehicles for long distances. Our service is more useful for the traffic maintenance department in case they want to capture improperly parked vehicles.
- Heavy Duty Towing: For loading large-sized trucks, or more than one vehicle at a time such as when we have to remove illegally parked vehicles, our drivers will reach timely and perform their duty.
- Equipment & Cargo Hauling: Our specialized drivers will also lift the heavy equipment and cargo within the city.
Marketing Analysis of Towing Business
What do you think will be required to open up a new tow truck business? Trucks, office, employees, yes of course, but what will you do with all these things if you fail to attract your target customers? So, before you start your new business, you must think about the reason of failure of so many startups. Well, it all depends upon how successfully you market your services. Understanding the marketing trends before making your towing business plan, will help you in developing your strategies. It is really important to consider the market demands and the requirements of your potential customers before finalizing your towing company business plan. A preliminary study of your target market will not only help you in writing a productive tow truck business plan but also tell you which program and policy will work and how. There are thousands of tow truck business plans available on the web, but a better practice is to make solely yours, focusing on your own market area. This tow truck business plan sample is written for Texas Towing focusing the marketplace of San Antonio. If, you have a different marketplace, then instead of depending upon this sample business plan for towing company, you should hire the services of marketing analyst to do accurate analysis of your market and make a perfect tow truck company business plan for you.
5.1 Market & Industry Trends
Having an idea of the market trends and tendency before designing your towing business plan template can assist you in determining your business strategies. The demand of tow truck business is facing a decline in the United States since the past few years as newer vehicles are equipped with modern systems to avoid accidents. Moreover, people usually prefer to help themselves instead of calling a tow truck company. A pre-knowledge about the reasons that caused decline in people’s interest in taking help from tow truck businesses will help you in running yours. After pointing them out you can amend those prior practices to ensure that you are doing well. According to IBISWorld, there are about 46 thousand towing businesses in the United States generating a revenue of $7 billion annually. The business is the cause of employment for more than 96 thousand people. The statistics are not really bad, but apart from them, you must focus on increasing the customer’s trust in you, if you want your startup to succeed.
5.2 Marketing Segmentation
The success or failure of a startup depends upon how accurately you know your target customers. Marketing segmentation must be included in your business plan, covering the details that how will you gain and maintain more and more customers inside and outside your target groups. Considering the importance of marketing analysis, Michael has hired the services of a marketing expert to identify his target customers and devising efficient sales strategy. You can take help by downloading this towing business plan pdf, we are providing towing company business plan sample free of cost for everyone who want to start this business. The detailed marketing segmentation of our target audience is as follows: 5.2.1 Local Residents: This group comprises of the residents or tourists who live in San Antonio. These people will surely need to come on the roads, their vehicle can damage, can run out of gas, the engine may seize, or may accidentally locked up in such a way that even the owner become unable to move his/her vehicle. These all situations seem worse when you imagine that you are in the middle of a busy road. Here this group of our target customers will need our service to either get the issue resolved by our technically skilled driver or by moving the vehicle to some other place or workshop. 5.2.2 Police & Road Maintenance Department: In big cities, and especially populous cities, there are many instances when people park their cars improperly or in prohibited places. Same is the case with cargo and equipment which shopkeepers or retail salesmen install on the road. In all these cases the police department needs our services to move or seize those equipment and vehicles. We’ll be providing discount to the police department so that they will use only our services whenever they need a tow truck. 5.2.3 Accident Responders: In the rush times, the rate of accidents and collisions increase in big cities. Whenever an accident occurs, there is a need of towing services to remove the damaged vehicle from the place to avoid inconvenience for incomers ensuring smooth flow of the traffic. We’ll also provide discount to this category, to remove the hesitation of people to acquire our services. The detailed market analysis of our potential customers is given in the following table:
|Potential Customers||Growth||Year 1||Year 2||Year 3||Year 4||Year 5||CAGR|
|Police & Road Maintenance Department||48%||22,334||32,344||43,665||52,544||66,432||10.00%|
5.3 Packages Pricing
We have decided to keep the price of our services low initially, as it is necessary to gain people’s trust for the business. We have different discount packages for all our customers in the first three months, and for accident responders, and road maintenance department throughout our servicing period. Due to our less prices, people will surely try our services at least for once, after the first contact we believe, that they will blindly trust our services for the rest of their lives.
5.4 Target of the Company
Our main business targets to be achieved over the course of next three years are as follows:
- To become the most renowned and most successful towing company in the whole San Antonio, by providing high-quality services
- To achieve the net profit margin of $10k per month by the end of the first year, $15k per month by the end of the second year, and $25k per month by the end of the third year
- To balance the initial cost of the startup with earned profits by the end of the first year
After identifying the groups of people, whom you need to attract, the next step is to advertise your services and come up with the incomparable competitive edges, so that more and more people avail your services whenever they need a tow truck. Before you think about how to start your own tow truck business, you must think that what will you be providing to the people that others are not, and why would they prefer you over all your competitors. In case, you are new to this business and need assistance while making an appropriate sales strategy, you can take help from this sample business plan written for how to start a roadside assistance company.
6.1 Competitive Analysis
Our biggest competitive advantage is our fast and quick service. On a call, our all-time ready and equipped tow truck will reach at the location in the nick of time and fix the problem. Our next biggest competitive advantage is that our truck drivers are specialized and trained to fix common vehicle issues, like if your car has stopped in the half-way, the first attempt of our drivers will be to fix the problem instantly, and if the issue can’t be resolved at the moment, then your vehicle will be taken away in a very careful and quick manner. Lastly, we are in a location where we can serve a lot of people as well as the road maintenance department. San Antonio is the second most populous city in Texas and the seventh most populous city in the whole United States, and for Michael’s, a larger population means enormous business opportunities!
6.2 Sales Strategy
If you are looking for how to start your own towing business and how to develop an effective sales strategy, you can take help from the following brilliant ideas, our experts have presented to advertise our services,
- We will advertise our company on social media and by setting up a company webpage by which our customers can contact us
- We will offer 20% discount to the accident responders to remove damaged cars
- We will initially offer 20% discount on all services for first three months
- We will offer 10% discount to the departmental police on our servicing
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
|Unit Sales||Year 1||Year 2||Year 3|
|Long Distance Towing||802,370||815,430||823,540|
|Heavy Duty Towing||539,320||770230||1,002,310|
|Equipment & Cargo Hauling||265,450||322,390||393,320|
|TOTAL UNIT SALES||3,494,170||4,588,370||4,807,410|
|Unit Prices||Year 1||Year 2||Year 3|
|Long Distance Towing||$600.00||$800.00||$1,000.00|
|Heavy Duty Towing||$700.00||$800.00||$900.00|
|Equipment & Cargo Hauling||$650.00||$750.00||$850.00|
|Long Distance Towing||$120,050||$194,500||$268,500|
|Heavy Duty Towing||$50,110||$71,600||$93,000|
|Equipment & Cargo Hauling||$139,350||$194,600||$249,850|
|Direct Unit Costs||Year 1||Year 2||Year 3|
|Long Distance Towing||$0.40||$0.45||$0.50|
|Heavy Duty Towing||$0.30||$0.35||$0.40|
|Equipment & Cargo Hauling||$3.00||$3.50||$4.00|
|Direct Cost of Sales|
|Long Distance Towing||$66,600||$119,900||$173,200|
|Heavy Duty Towing||$17,900||$35,000||$52,100|
|Equipment & Cargo Hauling||$19,400||$67,600||$115,800|
|Subtotal Direct Cost of Sales||$1,294,100||$1,699,400||$2,104,700|
Personnel plan is the most important part of a business plan, especially of a tow truck business, as this business will be solely dependent upon the skill of the drivers. If you are looking for how to start a roadside assistance company, put your major focus to the staff you hire. The staff required for a tow truck business startup and an estimate of their salaries is given here to help you in evaluating your startup costs and determining how to run a tow truck business successfully.
7.1 Company Staff
Michael will act as the General Manager of the company and will initially hire the following people:
- 16 Tow Truck Drivers
- 2 Accountants for maintaining financial and other records
- 2 Sales Executives responsible for marketing and discovering new ventures
- 3 Technicians for maintaining trucks and resolving technical issues of trucks
- 1 IT Expert for managing the company’s official website and social media pages
- 1 Customer Representative for interacting with customers
- 2 Telephone Operators for receiving calls and orders
To ensure the best quality service, all employees will be selected through vigorous testing and will be trained for a month before starting their jobs. Especially the truck drivers will be trained to resolve common technical issues of vehicles.
7.2 Average Salary of Employees
|Year 1||Year 2||Year 3|
|Tow Truck Drivers||$550,000||$650,000||$750,000|
The last but the most important step you have to take if you are initiating a business, is to develop a precise and detailed business plan covering all the details of how you will be able to balance the startup costs, the salaries of your employees, and the expense of your trucks and parking area with your tow truck business income. A comprehensive and effective financial plan is the one which contain the planning of how the company will achieve its goals and financial targets. So, before starting a tow truck business, you must formulate a detailed financial plan estimating your expenses and investments on the startup and its marketing, and roughly calculating the tow truck business profit that can be earned after meeting all the expenses. It is good to hire a financial expert to make an accurate financial plan for you, especially if you aim at widening your business scales. However, if you are starting at a small scale, then you can make your financial plan by yourself taking help from the sample business plans available on how to start a roadside assistance business. The details of sample financial plan for Texas Towing company are given here for your help:
8.1 Important Assumptions
The financial projections of the company are forecasted on the basis of following assumptions. These assumptions are conservative and can show deviation but to a limited level such that the major financial strategy of the company will not be affected.
|Year 1||Year 2||Year 3|
|Current Interest Rate||10.00%||11.00%||12.00%|
|Long-term Interest Rate||10.00%||10.00%||10.00%|
8.2 Brake-even Analysis
|Monthly Units Break-even||5530|
|Monthly Revenue Break-even||$159,740|
|Average Per-Unit Revenue||$260.87|
|Average Per-Unit Variable Cost||$0.89|
|Estimated Monthly Fixed Cost||$196,410|
8.3 Projected Profit and Loss
|Pro Forma Profit And Loss|
|Year 1||Year 2||Year 3|
|Direct Cost of Sales||$15,100||$19,153||$23,206|
|TOTAL COST OF SALES||$15,100||$19,153||$23,206|
|Gross Margin %||94.98%||94.72%||94.46%|
|Sales and Marketing and Other Expenses||$1,850||$2,000||$2,150|
|Total Operating Expenses||$188,766||$220,744||$252,722|
|Profit Before Interest and Taxes||$105,205||$146,040||$186,875|
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
|Pro Forma Cash Flow|
|Cash Received||Year 1||Year 2||Year 3|
|Cash from Operations|
|Cash from Receivables||$7,023||$8,610||$9,297|
|SUBTOTAL CASH FROM OPERATIONS||$47,143||$53,651||$59,359|
|Additional Cash Received|
|Sales Tax, VAT, HST/GST Received||$0||$0||$0|
|New Current Borrowing||$0||$0||$0|
|New Other Liabilities (interest-free)||$0||$0||$0|
|New Long-term Liabilities||$0||$0||$0|
|Sales of Other Current Assets||$0||$0||$0|
|Sales of Long-term Assets||$0||$0||$0|
|New Investment Received||$0||$0||$0|
|SUBTOTAL CASH RECEIVED||$47,143||$53,651||$55,359|
|Expenditures||Year 1||Year 2||Year 3|
|Expenditures from Operations|
|SUBTOTAL SPENT ON OPERATIONS||$35,296||$39,549||$43,582|
|Additional Cash Spent|
|Sales Tax, VAT, HST/GST Paid Out||$0||$0||$0|
|Principal Repayment of Current Borrowing||$0||$0||$0|
|Other Liabilities Principal Repayment||$0||$0||$0|
|Long-term Liabilities Principal Repayment||$0||$0||$0|
|Purchase Other Current Assets||$0||$0||$0|
|Purchase Long-term Assets||$0||$0||$0|
|SUBTOTAL CASH SPENT||$35,296||$35,489||$43,882|
|Net Cash Flow||$11,551||$13,167||$15,683|
8.5 Projected Balance Sheet
|Pro Forma Balance Sheet|
|Assets||Year 1||Year 2||Year 3|
|Other Current Assets||$1,000||$1,000||$1,000|
|TOTAL CURRENT ASSETS||$201,259||$237,468||$273,677|
|TOTAL LONG-TERM ASSETS||$980||$610||$240|
|Liabilities and Capital||Year 1||Year 2||Year 3|
|Other Current Liabilities||$0||$0||$0|
|SUBTOTAL CURRENT LIABILITIES||$9,482||$10,792||$12,102|
|TOTAL LIABILITIES AND CAPITAL||$198,839||$232,978||$267,117|
8.6 Business Ratios
|Year 1||Year 2||Year 3||Industry Profile|
|Percent of Total Assets||4.35%||4.71%||5.80%||9.80%|
|Other Current Assets||1.75%||2.02%||2.29%||27.40%|
|Total Current Assets||138.53%||150.99%||163.45%||54.60%|
|Percent of Sales|
|Selling, General & Administrative Expenses||74.29%||71.83%||69.37%||65.20%|
|Profit Before Interest and Taxes||26.47%||29.30%||32.13%||2.86%|
|Total Debt to Total Assets||2.68%||1.04%||0.76%||67.10%|
|Pre-tax Return on Net Worth||66.83%||71.26%||75.69%||4.40%|
|Pre-tax Return on Assets||64.88%||69.75%||74.62%||9.00%|
|Additional Ratios||Year 1||Year 2||Year 3|
|Net Profit Margin||19.20%||21.16%||23.12%||N.A.|
|Return on Equity||47.79%||50.53%||53.27%||N.A.|
|Accounts Receivable Turnover||4.56||4.56||4.56||N.A.|
|Accounts Payable Turnover||14.17||14.67||15.17||N.A.|
|Total Asset Turnover||1.84||1.55||1.26||N.A.|
|Debt to Net Worth||0||-0.02||-0.04||N.A.|
|Current Liab. to Liab.||1||1||1||N.A.|
|Net Working Capital||$120,943||$140,664||$160,385||N.A.|
|Assets to Sales||0.45||0.48||0.51||N.A.|
|Current Debt/Total Assets||4%||3%||2%||N.A.|
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