Not sure what to do :/

[Bobbytow]

I Have a situation going on. I bought a tow truck. Still paying about $1600 a month for it. I was eating off google calls for a while but they have tremendously slowed down. 

I have a buddy who gets non stop calls everyday. Has 2 trucks and is buying a 3rd. I have never been a service provider for an insurance company. They just call me when they don’t have anyone else in their system that can do the job. 

I would like to work for the insurance companies and motorclubs to get constant work. However they all require a 1,000,000 insurance! That’s another $2k per month on insurance. Is it worth it. I’m in desperate need. If anybody has some tips for me I would really appreciate it. 

Thanks. 

[EdsTowing]

I think you need to re-evaluate your insurance provider? It would be a $24,000 increase over what you are already paying for a 1 truck operation? That seems excessive....

 

And remember "Busy" doesn't equate to "Profitable". It's easy to be busy with that type of work...and even grow to multi trucks but sooner or later you got to pay the piper. Nothing against your friend, but most guys are busy right up to the day they close their doors... Figure out your true cost of operation, and don't be deceitful because you're only kidding yourself. Then be sure you can make at least that amount or don't do the call. Period! The days of "lost leaders" and "High volume but low margins" or "Take the good with the bad" are over...and I'll say that they were never a good business philosophy but even more detrimental in our current economy.

[Bobbytow]

I got another quote for 17k a year…. Is that more realistic. Truly appreciate the response. 

[Stubborn66]

Ed is giving you very good advise.  You need to know what your true operating costs are before you can make good decisions.  Once you do that, you will be surprised what it costs to operate a tow business but you will know what you need to make a profit.  It takes more than being able to run a truck to successfully run a business.  I have a chart to calculate expenses that I will share with you if you email me that can help you.  Like Ed said, many of these new companies will be busy as hell loosing money and not even realize it until it is too late.

 

As far as insurance, if you are a new company with no history, your options will be limited.  You need to have a few years under your belt and be able to share loss runs to get better rates.  The biggest cost factor is generally your "on hook" coverage.  Most of the insurance companies require 150K of On Hook coverage.  Be sure you are getting quoted for On Hook, not just general liability.

17K for a new company with one truck is high, but not sure you will do much better.  Progressive is where many new companies land in the beginning

 

Motor clubs will not sustain a Tow business in my opinion.  They are great as fill in work but if you are going to be relying on them, you have a tough road ahead.  If you are solely a towing operation, you need to reach out to local repair shops, and establish your name with them.  Police rotations are great if you can get on, but they generally have equipment requirements as well as insurance requirements.  Google ads are another good source of customers, but they will generally be shopping price.

If you do go the motorclub route and you and your buddy are in the same area, I would find out his rates and start higher in my negotiation with the clubs.

 

Good Luck

 

 

[Bobbytow]

Thank you for the knowledge. Is there a good email I can reach you at? 

[Stubborn66]

tracy@blainesrepairservice.com

[goodmichael]

On 9/8/2022 at 11:15 PM, EdsTowing said:

I think you need to re-evaluate your insurance provider? It would be a $24,000 increase over what you are already paying for a 1 truck operation? That seems excessive....

 

And remember "Busy" doesn't equate to "Profitable". It's easy to be busy with that type of work...and even grow to multi trucks but sooner or later you got to pay the piper. Nothing against your friend, but most guys are busy right up to the day they close their doors... Figure out your true cost of operation, and don't be deceitful because you're only kidding yourself. Then be sure you can make at least that amount or don't do the call. Period! The days of "lost leaders" and "High volume but low margins" or "Take the good with the bad" are over...and I'll say that they were never a good business philosophy but even more detrimental in our current economy.

This is sound advice. Volume does not equal profit. You can make just as much money with one truck as you can with three if you market your business, have a clean truck, and provide service that does not just meet, but exceeds your clients expectations.

Please call me direct

Michael

210-296-4823

[someotherplace]

Got to love seeing experienced members stepping up to help the new folks.  As long as you're willing to listen and learn from those that have gone there, you're stepping in the right direction.

 

Motor club work has got to be the #1 pitfall new towers get into, thinking they will "make it up in volume" - there are many calls that you will lose less money by never turning the key for them.

 

Richard

[fenderbendr6]

It doesn't hurt to let the motor clubs know that you exist, but never sign a contract with any of them. If you do, you will be locked into whatever discounted rate you signed on for. It is much easier to get into a contract than it will be to ever negotiate a rate increase. They may not call often, but when they do, if you quote your commercial rate and make them pay in advance with a credit card, then you make a profit on that call, just like any other call. Keep in mind that they won't accept your price if they can find another tower to do it cheaper. Don't be that guy!