#businessideas #towing In this Business Idea Breakdown, I review a Tow Truck Business or Towing Company. I gave this business an 8.3 out of 10 due to the numerous factors below. Anything over 8, is a business I would start.
Ability to Scale: Yes, this business can be scaled but not easily. Every time you scale, your fixed expenses increase. You will need to buy another truck, hire an employee, pay more insurance, and have additional maintenance costs.
Is it profitable? Yes, the average tow cost is $75 - $125 a tow. Using an average of $100 and an average of 7 tows a day, you daily revenue would be $700 a day.
- To buy a nice used truck, the cost would be around $60,000.
- The average profit margin for a towing company is 70%. This means your daily profit would be around $490 a day.
- It would take ($60K / $490) around 122 days to pay for your truck.
- If you finance the truck with 25% down ($15,000 down), your monthly payment would be around $850.
- With your down payment ($15,000) and 2 monthly payments (2 X $850), it would take around 34 days to turn a profit.
- After that, your monthly cashflow for 20 days of work (5 days a week) would be $9,800 - $850 (loan) = $8,951 a month.
- This would be around $100K-$110K a year in profit!
How easy is it to start? The biggest barriers of entry is capital for the down payment, ability to get tows, learning how to operate the truck, and being a good driver.
Does it require a lot of time to run? Yes, this would be a full time job with pretty unknown hours. Most towing companies operate 24-7. Meaning, you will likely be on call for random hours throughout the day.
What are the challenges: Burn out, since you are working weird hours and dealing with traffic, burn out will likely occur. Scaling this business will also come with some additional head aches of hiring, and finding the right truck.
Is the business sellable? Yes, this business can be sold depending on the following factors.
- You can always sell the trucks and equipment for its current value.
- You can potentially sell the business for a multiple of the net income (profit) if the business itself has value. What is value? It is it's ability to bring in business based on its contracts, website, and relationships. If you are just using a towing broker to generate your tows, then there isn't much value outside of your equipment. Anyone could operate it from scratch.
- You need to create value in your business or you will never be able to sell it.
In conclusion, if you are making under $100K a year, I would highly consider starting this business.