Over all of the years one question that seems to come up with some frequency is whether shops should offer towing services on their own. The question makes sense. Why pay an outside service and give up the additional revenue? Why trust your customer’s satisfaction with the tow to someone you don’t know? Why make your customer sit and wait for a tow? All good questions. Today we’ll cover the three major options you have regarding towing, along with the pros and cons.

There is nothing permanent except change – Heraclitus

First, some thoughts to set the stage.

1. Do I hook conventionally or get a flat bed. The answer depends on a lot of factors. First, a conventional rig is anywhere from $15,000 to over $30,000 for a decent used truck. New conventionals start at about $35,000 and go up from there. Flat beds start about $45,000 to well over $100,000. Add a heavy truck two rig and you’ll shell out into the hundreds of thousands. Here are some thoughts, pro and con:

• Conventionals are less expensive and may be easier to load if you don’t have access to the vehicle keys to get it into neutral gear. A conventional allows you to lift the locked axle where you’ll have to drag it on to a flatbed.

• Conventionals are easier to train for use as a rule. Flatbeds generally require more in-depth training.

• Conventionals take less parking room on your lot. Due to their lighter frames, they are typically less expensive to operate and get better mileage.

One factor to recognize is the type of vehicles you work on as a rule. Generally, anyone with a more expensive vehicle or a high-performance vehicle wants flatbed service and not a hook. Some shops solve this by getting one of each to meet customer requirements. See prices above!

2. Insurance is a bit tricky for a tow truck. As a rule, there are fewer companies offering tow-truck coverage than garage policies. A list of recommended coverages according to insurance pros (this is NOT an advertisement and I am NOT an expert, so get professional help):

• Collision coverage for your truck

• Comprehensive with fire and theft for your truck

• Liability coverages with an excess liability policy (umbrella)

• Property damage for other people’s stuff

• Uninsured and underinsured motorists for your truck

• Tow legal liability to protect customer cars when stored in your shop

• On-hook coverage that protects the customer’s vehicle on the hook

• If you do repossessions, and that exceeds a certain amount of your total tow revenue, you may have to look far and wide for coverage, and get your checkbook ready

• Be sure to review your worker comp coverage. I will guarantee that the rate per $100 is higher for your tow driver than a tech, and that ain’t cheap!

3. You must have somewhere to store the vehicles you bring in. This area needs to be made safe to help avoid a customer car claim for damage. Generally, shops with towing tell me they store the vehicles in a fenced, locked, well-lit area with camera coverage. If you don’t put it in the shop or go home with you, your truck needs to be in the corral as well.

4. Your driver(s) will depend on the type of services you’re offering. You may need a dedicated driver or team. You most certainly will need to train and retrain the candidate(s).

5. You may need to talk to your city to make zoning modifications to add outdoor storage. Before launching any plan, be certain to talk with your attorney for guidance on zoning and design. And, as always, I am willing to bet there’s a fee for putting up a fence!

6. Check out all of the varied licenses and permits you will require. There will be federal, state and quite possibly local requirements, all with a fee to be certain.
7. Never forget that if you use a subcontractor to tow and there’s a property damage claim on the customer’s car, it really doesn’t reflect on you. On the other hand, if it’s your truck and you’re getting the money, it may cast a bad shadow over your entire operation.

8. Talk to your attorney. For my money I would put your tow service in a separate corporation with its own insurance, payroll, etc., and get the liability away from your shop!

9. With all of this said, a review of federal stats from 2016 we find a one-truck operation will develop revenue to $100,000 to $200,000 a year depending on focus.
If you work just for money, you’ll never make it, but if you love what you’re doing and you always put the customer first, success will be yours. – Ray Kroc

Now comes the really big question. What kind of towing operation will you operate? The basic three options, in order of increasing complexity, are:
• Your shop customers only

• Full-time dedicated operation offering a wide range of towing services

• Contract towing

Offering a tow service only for your shop customers may make sense for four reasons:

1. It is typical of competition in your area.

2. There are no dedicated towing operations other than your competition.

3. You wish to have greater control over the customer experience from pickup to end.

4. The existing services in your area aggravate your customers by long wait times, poor service, driver issues and more.

On the other hand, it is important you realize that:

1. You will most assuredly not make a dime on this service and, in all likelihood, will lose money.

2. Related to the first point, your investment does not go down. After all, this is supposed to enhance your image, so showing up in some heap of a tow truck isn’t likely to make the vehicle owner all warm and fuzzy.

3. Your driver will come from your tech ranks by necessity. Do not make the mistake that it could be you. Tow calls are not planned events by their nature. As a result, you may have to pull off the tech right in the middle of a job and disrupt flow through for the entire shop.

4. You may still have to take care of the licensing, possibly zoning, storage and driver training as though you were a dedicated full-time service.

And now the BIG one. Having worked with my uncle who ran a towing business, I learned early on that customers call in three circumstances. First, it is 2:30 a.m. and you are sound asleep after a brutal day in the shop. Or, it’s at the height of the coldest cold snap in 50 years. If you are really fortunate, they are parked sideways in some ditch in the middle of a snow storm, or ran off of their driveway. Or, the temperatures have never been as a hot as today, and the humidity is 90%.

When all of this is taking place, who is taking the call? Your customer is looking to you for service. And, from my experience, you will find your tech/driver suddenly has developed a dead battery in their cellphone. So, what I’m saying is 8 to 5 your tech really has no chance to wriggle out, no matter the conditions. Other times it will likely be all about you! After all, your name is on the line.

So, summing this up: If you must add the service for the reasons above, and I would still think long and hard, go for it, I guess. Otherwise, take your tow company owner out for lunch and establish a great relationship and the promise of “right now” service with their best equipment and drivers.

The entrepreneur always searches for change, responds to it, and exploits it as an opportunity. – Peter Drucker

The second option, setting up a full-service, dedicated tow service is really starting an entirely new business. It is not an extension of anything you do now except that your shop may be one of the customers. Other than that, you MUST establish this as a second business, free of your existing business. Here’s why:
• You don’t want any issues with the tow operation reflecting poorly on your shop.

• Liability towing is a really big deal, get it far, far away from the shop.

• Out of necessity you no doubt will require a separate building, location, storage yard and all of the items we spoke of earlier.

• You need to have enough distance from the shop that other shops have an easier time calling you.

• You need to be ready for the full range of services whether conventional, flat bed, tire service, jumps and more.

• You need a dedicated employee group with all of the issues that creates.

• You will have to be able to successfully own two businesses that, while related, are very different until one or the other grows to the point of supporting a manager of its own with responsibility to you.

Again, you will get the middle-of-the-night calls and bad-weather calls to cover for your driver(s) and still get up and get to the shop.

As for my opinion, if you are willing to see this as a new business, with all that entails, and still want to do it, go for it. You’ll need/want a very detailed operating and marketing plan, proper legal and accounting support and likely a very good relationship with your banker since banks don’t like to own tow trucks. While you’re at it, be sure to talk with tow truck dealers in your area to check out what’s available.

The last option is a bit of a takeoff from the second. If you decide to launch a towing business, there are a number of options available:

1. Customer-generated calls: They may not be enough to keep you busy and make money

2. State, county or local contracts for road support, accident recovery: These are tough for a new operator with a limited budget and equipment since these entities have VERY demanding rules as to call times, staffing, storage, high insurance limits and much more. It generally makes sense to request a copy of the contract from the entity and ready it before you decide to go after this business.

3. Collision shops: Generally these are more about the municipal contracts and insurance deals, and hard to get otherwise.

4. Auto clubs: See all of the rules above and add the likely need to add their logo in some way to your trucks. And some of the tightest response times are auto clubs. In addition, there are generally fairly generous discounts to the club, which means fewer dollars for you. Like municipalities, understand the rules before you leap.

5. Repos and bank work: Be VERY, VERY careful here. My uncle’s tow business did repos. That meant I did repos. Getting insurance was tough and the lenders wanted plenty of it. Your hours tend to be extremely erratic. Plus, the people who are losing their transportation tend not to be the friendliest bunch. Hint here is that most of your work is a backup to the vehicle, hook up best you can, tow the vehicle to a lit, safer area then spend your time completing the hook. More than once we had to drag a front wheel drive out of a parking stall at 2 in the morning by the rear and drag it, tires screaming and driveline protesting, somewhere away from the hook to straighten things out. Hard to pull off quietly or get clear of someone trying to chase you down! If you were really fortunate, you got a key from the lender and could tie/strap the steering wheel and put the vehicle in neutral. 

Well, we could go on from here. But it is my desire that this material gives you what you need to either forget the towing operations all together or plunge ahead. Come on, you know you want one of those shiny trucks. Who doesn’t? I do. But think long, think hard and think again before you head down this road. It may be a real asset or a huge pain, and very little in between.

Thomas M. Langer Jr. has a career spanning a lifetime in the industry and is combining his experience with new information to provide readers of Undercar Digest with information you need to build a better business.