How would you like to be your own boss?
If you’ve been in the towing business long enough, you know how stressful it can be. Yet, there’s something special about starting your own business.
It’s also a good time to start a towing business, with steady growth over the last five years. That doesn’t show signs of slowing down.
It’s the perfect time to put on your entrepreneur hat and start your business. Read on to find out what you need to do to get your business up and running.
How Will You Make Money?
The first order of business is to decide what kind of towing company you will be. Your business can focus on roadside assistance, repossessions, exotic cars, or construction equipment.
This will take some research on your part because you want to know what the market is like in your geographic area. You want to see what the competition does and where there are opportunities.
You also have to survey the area and find out what kind of towing services people in your area need. You may find that there’s no one in your area who specializes in exotic sports cars.
That may seem like a good option for your business, but you may soon discover it’s because people don’t own exotic cars like Ferraris or McLarens in your area.
You’ll want to document all of this information in a business plan. You can make this an informal document, but if you plan to get loans or investments in your business, you need a detailed plan.
Business plans show how you’re going to be profitable. You’ll need to document all of your startup and operating expenses along with projected sales.
Decide on Legal Structure
Your next step is to learn about the different legal structures of your towing business and decide which one is the best one for you.
The most common options are to be a sole proprietorship, LLC, or S-Corp. The differences in each structure have an impact on your personal liability in the business and your taxes.
Running a business as a sole proprietor is not the best option for your business. Your income is taxed as an individual. The main reason to avoid this structure is because of the liability. Should anything go wrong with the business, you will personally be held liable.
For example, if you get into an accident and get sued, your personal assets like your car or home are at risk.
You’ll want to seek guidance from a business lawyer or CPA to help you make the best decision.
Register the Business Name
Once you have the business structure, you can register your business with your state’s secretary of state. You’ll need to do a search to make sure that the business name isn’t already taken.
When you do settle on a business name, you also want to buy the website domain name. That will help with your marketing later on.
EIN Numbers and Bank Accounts
Once you have your business registered with the state, you’ll need to get an Employee Identification Number from the IRS. This is similar to having a social security number, it just for your business.
The IRS makes it easy to apply for an EIN. You just go online, fill out the information, and you’ll have your EIN in a few minutes.
You can take that information and open up your business bank account. Most banks require your articles of incorporation and EIN if you registered your business as an LLC or S-Corp.
Get Licenses and Permits
You want to make sure that you’re able to legally operate in your area. The requirements will be different in each state. You’ll want to check with your state’s Department of Transportation to get your license.
It’s also a good idea to check with your city and surrounding areas. Many cities like Philadelphia require towing companies to have a license to operate within the city.
Invest in Equipment
In order to have a thriving towing business, you need equipment. The type of equipment you need will depend on the type of towing business you plan to have.
For a roadside assistance business, you can start with just a tow truck. However, if you plan to tow large items like construction equipment, you’ll need to invest in air tow drop deck trailers.
The costs of your equipment to start your towing business can be steep. You may want to consider getting a small business loan.
Have a Good Insurance Policy
There are so many hazards in the towing business, insurance is a must. You have to deal with crazy drivers, irate people, and many close calls. It can be hard to get because insurance companies are backing out of the industry.
You’ll need a policy that covers your vehicle, the driver, and the car or equipment you’re towing.
There are other liabilities that you need to consider. If you keep other people’s cars at your garage, you need to have the garage keeper’s insurance.
There may be minimum requirements to get a license or permit to operate. Be sure to check these requirements before you sign up.
Market Your New Towing Business
You have all of the pieces in place. You just have to get customers. That can be easier said than done. There are a number of ways to market your business.
At first, you’ll want to spend money on digital advertising to get your company name out there. When people are in need of a towing service, they’re likely to search using their phones first.
Your business needs to be at the top of those listings through organic search and paid ads.
Start Your Towing Business Today
Starting a towing business can be hard because there are so many little details to know. You have to know marketing, tax law, licensing, insurance, and so much more.
With these tips, you should be confident that you have the information that you need to start your business.
Do you want more information to help you get your business up and running? Head over to our Business Finance section for money management tips.