10 Jun 2014
An interesting article crossed my news feed this week addressing uninsured towing companies. This is an issue many legit towing companies face; competition from uninsured and under-insured companies. These companies gain an unfair advantage at the expense of public safety and consumer trust. According to this article a couple operating a “towing business” damaged a 2007 Lamborghini Gallardo while moving the vehicle and then apparently attempted to claim the damage on their personal insurance saying it was not a paid tow. The couple now face serious changes including the possibility of up to five years in state prison and a $50,000 fine. I am sure the vehicle owner would have preferred to pay a “real” towing company a few more bucks and avoid this entire mess.
05 Jun 2014
I ran across the below video last week and was somewhat shocked by their findings. This report was a result of a recent FL accident killing tow truck driver John Duggan and Chelsea Richard, 9-year veteran of the Florida Highway Patrol. This is a horrible incident and one that towers and law enforcement face every day. What seems more egregious is the clear selective enforcement of the Move Over law. In the video the news crew finds 78% of people move over for a police vehicle and less than 3% move over for a tow truck. But when searching moving violation records just one ticket was issued for failure to move over for a tow truck compared to 670 tickets for failure to move over for a police vehicle. I don’t think there is a considered effort on the part of law enforcement to not support towers I just think there may be a lack of awareness. What if every tower had a Move Over patch on their uniform? What if every tower reminded officers of the need for their support in the line of duty? Maybe there is something we can do to further increase awareness of our own safety.
Today I received a call from Florida tower who purchased the Black Book of Towing a few years ago and gave me a call with a question. He has applied the principles of the book and has grown his company adding trucks and employees. He was interested in knowing where is fleet was at any given time to ensure optimal dispatch and response. I recommended he check out the tow truck tracking software providers to see if something fits in his budget. With increasing competition decreasing costs even the smallest tow companies can often find a working and affordable solution to tracking their tow trucks.
Most of these systems offer real time tracking including speed, stops and even PTO engagements. You can set up geographic areas and get alerts when your truck leaves that space and all sorts of reports. Here are a few I have seen at the tow shows;
19 Feb 2014
Left in the wake of the recent and frequent storms to hit much of the Midwest and Eastern US this winter are clear roads and complaints of towing fees. It always amazes me to see how much people are willing to complain about a cost of a service that is almost immediate and provides the level of service and safety rarely seen from other services. It makes me wonder: “What do people expect a tow to cost?”
The never ending waltz between towers, those towed and property owners is the source for great friction in just about every urban and suburban community. Private property towing plays an essential part in ensuring property owners and managers can effectively manage their space and provide sufficient access to parking for tenants, visitors and patrons. It is equally important towers recognize that predatory towing exists. And those towers employing deceiving tactics are hurting the towing industry as a whole and their personal business prospects. But what can we call do to address and resolve the situation? Provo Utah’s mayor wrote an article recently making his recommendations. And though no solution is ever perfect right out of the box I think it is a good idea for this conversation to advance in the hope it can achieve a solution.
In addition to the good mayor’s comments I would suggest a few more ideas to address the issues. A considered and complete solution to this challenge could be a nationwide model. Since property owners are the decision maker in this process, providing access to them about quality providers in the area could help. This includes transparency of complaints filed against towers more visible and opening up truck inspection records. An informed decision is always a better decision.
Penalties for repeated abuses of local towing ordinances must be severe and enforced. Too often, local government’s solution is more regulations and paperwork which just creates more work for good towers and the bad guys ignore it as they do other requirements. The vast majority of towing companies are filled with hard working, family orientated people. They create local jobs, consume a great deal of local fuel (pumping a lot of road taxes into the local economy) and are committed to providing excellent service to their customers. But its always those few outliers that seem to garner all of the headlines and set the reputation tone for the entire industry. Reputable towers almost always welcome a more open relationship with local law enforcement. Spot checking paperwork, proactive enforcement and meaningful investigations into alleged wrongdoing can send the message that this is a issue on the department’s radar.
The penalty for repeating abusers can’t be just to give back the fee. The penalty has to hurt to be effective. Larger fines might be a solution. Another possible solution is for all area towers to maintain a municipal towing license. Then, as violations rack up tower licenses could be suspended for a set period. I know this all takes a fair amount of administration to manage and enforce but the mayor said this is the issue he spends the most time on. And he is not the first mayor or police chief I have heard this from. Committing to this solution can send a message that will be heard by all towers.
In our country, more often than not, regulation for any industry is bad for business. But unless the towing community helps to solve some of these challenges by forwarding reasonable and equitable solutions, that is exactly what we may see down the road. And its entirely possible that ill-considered, fast to act regulations will only put more paperwork and overhead costs on the shoulders of the reputable towers and be ignored by the bad apples. But its always better to have a seat at the table when these discussions are happening.
Starting a towing company can be both a rewarding and challenging process. But as excited as you may be to get the wheels rolling and the cash coming in, there are a few things you may want to consider before opening your doors.
1) What kind of company do you want to build? Diversity in sources of business is important when running a towing company. The old adage “Don’t keep all of your eggs in one basket” holds true for the towing industry as well. Understanding the potential sources of business (or where your calls will come from) and how profitable they each are can be helpful in determining how successful you will be from the start. Having a healthy mix of sources protects you from being overly vulnerable to the ebb and flow of any source demand. For example, tow companies that relied upon servicing new car dealerships were in a world of hurt during the economic downturn and auto manufacturers were closing locations. The most common sources of work for a towing company are calls received from:
Municipal/Police Calls- These calls will come directly from the police dispatch officers at the request of officers on the scene. Towers establish formal or informal relationships with local police departments to provide towing services. Fees per call are usually the highest of all sources but usually require higher insurance coverage and quicker response times. Check with the local police departments in your area to learn what the procedure is for getting on their list of providers.
Cash Calls- This is also a profitable source of calls. These calls are performed for customers who contact your business directly and pay you directly for services performed. These calls are generated through advertising and marketing efforts organized by the tow business itself. Learning how to build a successful brand for your business and cost-effectively drive calls from cash customers can deliver profits for years to come.
Motor Club Calls- Little expense and little profit. These calls are a great way to get your feet under you while starting a new business. It’s a steady stream of work so you can learn how to run your company. You have no advertising expense and the phone just rings and rings. But with often less than $5 profit per call don’t start planning your retirement servicing motor clubs alone.
Account Calls- Every auto repair and body shop needs a tow partner. And though a discount is typically provided to the shops for their calls the profit can be 10-times that of a motor club call. But be ready to work to build these relationships. Shop owners have heard every pitch under the sun from a tow company. So another guy at the counter offering to do it cheaper is nothing new. Talk up your brand and your expertise and your commitment to making their customers happy, otherwise you’ll look to him just like every other tow company in the bunch.
Auction Calls- Providing services to an auction house like Copart can be another great way to provide some stability to a new towing business. These calls offer similarly slim profit margin as motor club calls but they have the added benefit of a flexible response time. You don’t have to be there in 20 minutes so long as you complete the call that day. So you can have the flexibility to respond to other, more lucrative calls and get to the auction call later in the day.
Private Property Calls- These calls are to remove vehicle from private property without the vehicle owners’ consent. This type of towing typically requires additional licensing and reporting and due to the fact that you are moving vehicle without keys can require additional operating training to minimize damage claims. PP towing can be a high-risk, high-reward business but may just be the perfect fit for a new and motivated company. Consider purchasing a light-duty self-loading wrecker for PP towing to make loading easier and safer.
2) How much are you going to charge per call? This is the million dollar question. The answer is how much do you want to make. Working backwards from your desired income, then adding in anticipated expenses and finally dividing by the number of calls you think you will perform can give you an idea. But that is putting a lot of pressure on your ability to guess correctly at some really important numbers. Consider calling around to local tow companies and take an informal poll to see what the competition is charging. Then make some estimates on what you think your volume will be across all sources of work (most have unique prices) to get your projected annual revenue. But be sure to track these numbers closely. If you see your actual calls underperforming your projections make adjustments sooner rather than later. Most new companies will fail by allowing expenses to outpace revenue. And plan on living on a small salary for the first 6-12 months. Much of the profits will need to be pumped back into the business to acquire one-time purchases of equipment and supplies.
3) What assets will you have day one? A big mistake made by new business owners is buying an expensive truck or fleet of trucks in their first month of business. Keeping truck payments and other big expenses to a minimum in the first year of operations may not be the sexist path to success but could prove to be the wisest path. Fluctuations in fuel prices, employee expenses and supplies can sneak up on a new business owner so prepare for the unexpected, even if you do not yet know what it is. Plan to have $10,000- $20,000 in cash in the business at any time. This could be in accounts receivable, cash advances for body shop clients and prepaid insurance premiums.
4) How do you want customers and future customers to describe your company? Build a brand, not just a company. With an overabundance of towing companies to choose from consumers often select companies at random to call for a quote. Make your business stand out by having a good name and strong marketing plan. Having these in place before you start spending on advertising will make that money work harder for you. And be careful when committing to long-term contracts like annual yellow page business directories and online advertising commitments. Ask what you can expect in return for your money and remember, much of this can be done yourself for little or no expense.
5) Who will be your first customer? Start building your contacts now. Your company doesn’t have to be up and running to print business cards and go around introducing yourself to potential customers. Tell them you are launching in 3 months but wanted to understand what they look for in a good company. It will show your dedication to providing a good product as well as provide you with some insight on how to better compete with your future fellow industry professionals.
Bonus Tip! As the internet evolves to being a local resource tool securing positions and a sound, affordable online marketing plan is almost as important as having a truck. Partner with a marketing person who has knowledge of the towing industry. Their experience can help you learn on the job and even offer the change for your to avoid some of the most common pitfalls. A marketing partner should be a sounding board for your ideas and should earn their keep month after month. If your marketing partner is not delivering a profitable plan, find a new one.
Having your own business can be a great experience but it will always be hard work. Preparing for some of the common pitfalls before opening your door can help ease the stress and have you better prepared to take on the daily challenges of a tow business. After running a successful tow company for several years I know much of what you will need to do is not difficult work, its just hard work. Committing to be the best when it come to solving customers’ problems by getting the job done will go a long way to ensuring your success and will give you a huge boost over your competition.
After selling my tow company, I created TowProgram.com as a way to help new and existing towing companies become more profitable. The program is skills training for the business side of towing. Its an educational tool that simply, easily and effectively tackles the biggest challenges tow companies face. It covers:
- Cost-effectively building a strong brand to make your company stand out
- Easily computing costs and revenue per call leading you to greater profits
- Adding automation methods to help your business run more efficiently
- Better managing employee relations
- Preparing your business for a profitable sale
Learn more about The Black Book of Towing and Our Online Tow Company Advertising Products at www.towprogram.com.
09 Dec 2013
2014 promises to be another great year for tow shows. As the economy improves towers nationwide will be flocking to tow shows to see the latest trucks, technology and teachings. Be sure to catch the TowProgram team on the road again this year helping towers cost effectively target cash call customers with internet advertising. Below is the 2014 tow show schedule.