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How to break the motor club habit??

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Dtowingfl Wrote in December of 2009:

 

First thing I will admit is I am not a tow guy. I come from an automotive background and the few recent months I have spent managing a tow company have been an eye opener for me. Long hours, lots of stress and tiny little profit margins seem par for the course!

My situation is this. The co. I am working for does about 2000 calls a month, runs a fleet of 15 trucks including a medium, hvy and a landoll. They do some rotation work as well as have a small municpal contract. From what I have seen, they are not unlike alot of other towers. Problem (to me anyways) is that around 1000 of their tows a month are for AAA, with an average charge of $33 ea. We are bringing in about 125k a month in revenue and have 125k a month in expenses. Now of course all the new trucks they leased through Sterling a few years ago are miled up from all these low buck calls and are falling apart.

To me, the writing is on the wall. If they keep up at this pace the fleet will deteriorate faster than the revenue comes in and this place will self destruct. I have done the math and if we dropped AAA cold turkey we would lose about 30k a month in revenue, but would actually drop 30k to 35k a month in expenses! This from what I gather is also not unlike many towers who blindly get sucked into the motor club business and never do the math to realize its not profitable.

Problem is the owner is terrified to drop them. Try as I may I cannot get him to see the wisdom in letting go of this unprofitable, stress laden volume treadmill to focus on more profitable sources such as PPI's, commercial accounts and cash business.

Have any of you found yourself in a similar position and how can you break someones irrational and destructive dependance on motor clubs before it takes them under?

 

Adams Towing said:

What are you going to do if those other sorces of income slow down? They always do. Maybe have a meating with your rep and discuss a better contract. If you are a quality provider for them they will understand you have to make a profit. You might be able to cut cost on your end as well, look at the big picture you might have more than one thing that you can cut back on. It's just my opinion but you got to do whats best for you.

 

Dtowingfl said:

Man you hit the nail on the head.

I started towing for myself in 1996, and was contracted with all the motorclubs, and small P.D. Rotation list. I done this up till 2004, after the stress and costing me a mariage, I finally parked everything for about a year.

During this time I was so scared that if I didnt have the calls the trucks would sit and I would have to pay the payments on the trucks out of pocket, so I thought I had to have the motor clubs to make the bacon to give it away. I only had 5 trucks now heavy nor landoll to make the other ends meet, just light duty, medium duty, and 2 service trucks that is not part of the 5 mention for battery service and what have you.

Now since I have came back into the game through the divorce got to keep 3 trucks 2 paid for, and the service units, I am not as fast to contract, now I do contract with a hand full, but letting AAA go was a good thing no more stress no more reports of poor performance ect.


Only thing I can say is good luck, I had people telling me the same thing for years of what you are trying to get across and never listen I knew best. How wrong I was after I add up what I lost in this process.

 

wyomingtowpro said:

You cannot make profit @ 33.00 per call. Those days are long gone. All you do is spin wheels and ware out trucks and drivers. This is a hard reality I faced at one point in my business, b4 I closed it. And fyi...it was closed due to wifes illness not financial issues.

Now heres my suggestion. You must do a cost audit. In order to put thing in prospective you have to know basically what it cost to operate the truck (s). Luckily for me my wife is a accountant and auditor by trade. Once you have done a cost audit, you must cut your cost and eliminate unnecessary spending. Tighten the belt. You cannot operate a business without knowing the numbers and putting all you finances in prospective. Being able to sustain in business will be easier after you have done a cost audit.

As far as AAA...You must contact them and explain your situation. Im sure there are other comapnies in your area that are on a waiting list to go tow at the same if not a cheaper rate. You can call them b4 you do a cost audit and possibly get a small increase that will give you some short term relief. But you have a better bargaining tool if you know where you need to be b4 you call them. Be prepaired for them to turn you down. Very few customers are loyal and compassionate to the needs of service providers. They have too many idiots that will work cheaper. You have to find out what it cost to operate, and set your rate based on that cost, and stick to it in order to make a profit!!!!!!!

I found that it is truly ok, to fire a customer if they cannot or will not give you an increase based on you true cost of doing business. You will find that once you shed yourslef of the unnecessary expenses, and you get rid of the cheap rate customers you can keep you head above water. This may cause you to downsize your fleet. You need to replace the cheap customers with new customers. You will need to start a mass marketing campane in your service area. Both national accounts and local customers. Its a lot of work to turn a business around but with the support of the owner you can build a better model of the same company.

If you need advise on cost audits and stragities give me a call. 6154895749. Jeff C. / Buffalo, Wyoming

 

tlwtowing said:

I think the total is a bit higher than 33.00, my brother gets more than that for a hook up with AAA. He has a repair shop also. I would say with enroute and loaded miles it has to be over 40. figure 40 dollars you have one hour of labor at 10.00 and 2 gals of fuel at 6.00 that leaves 24.00. 1 truck runs 10 calls that leaves 240.00 after fuel and wages. take out 15.00 for workmans comp and 11.00 for insurance you get 216.00 profit per truck. 216 times 30 = 6480.00 per truck minus 480.00 for maintenance equals 6000 dollars profit per truck per month. Provided you dont run out and buy all new equipment and watch you overhead I showed you your are making money. If you cant make it with each truck bringing in 6000 a month your living beyond your means. Insurance is based on what I pay for garage keepers 1,000,000 liability and 50,000 on hook at 330.00 a month. so if you run 600 calls a month the profit would be 12,000 dollars thats 2 trucks 10 calls a day heck even take out another 2,000 for rent and a part timer your still clearing 10,000 a month.

 

Dtowingfl I think your math is off 2000 calls times 40 is 80,000. But lets say the do bring in 125,000 a month, I dont care if all the equipment is new the most in payments should be is 40,000. say 6,000 for insurance and 8,000 for fuel is 54,000. wages for 15 guys say average 500 a week. 30,000 thats 84,000. set aside 7500.00 for maintenance and 2500.00 for workmans comp now your up to 94,000. say 2,000 for rent and 3,000 for utilities your at 99,000. The owner is clearing 26,000 a month.

 

maricle1 said:

You are grossly under-insured if your on hook is only 50k,A king Ranch F-150 will cost that, Much less if you are carrying doubles.Your numbers in your example are also unrealistic for a tow.Try using REAL LIFE numbers and see if your still making a profit!!! The best advice I can give is do exactly as Jeff said and do a cost audit. Know what it cost you every time the key turns, every mile the truck runs factor in everything and contact the clubs be point blank let them know what you NEED to continue the level of service they have become accustomed to.I do this each and every year (my mom is a accountant and wife is going to college for it) So far No club has refused and if they did I'd drop them! really it's as simple as that YOU have to make a REAl profit and you can't make it by drivers for 10.00 like suggested.........Kenny
Kenny Miracle
''Miracles Do Happen Here''
4cf1684fdf1bee71b58477f97563304a6b4b41c2
 
wyomingtowpro said:
Nothing personal tlw towing, But....your math is wayyyyyyy off. He stated 2000 call a month and 1000 AAA were an "average of 33.00 per" And in your comparison math you need to remember that there are a lot of other expenses besides the obvious. A cost audit will require not only for you to look at quick books or your accounting programs accounts payable, but to look at the check book and see where you wrote checks that are not accounted for, and what about all those " Cash calls"?? All the expenses that you paid and didnt keep the receipt. A true cost audit will take you so deep in your personal and business finances that you will be amazed how you can save money once you look at EVERY DOLLAR you spent in physical 2009 vs EVERY DOLLAR you made in physical 2009. That Why you need to wait until after the year end. You need to do all 3..End of month books, End of quarter books, and the close out the year, get your taxes prepped and know what you tax liabilities are.

The reason most businesses struggle is because they cant break the cycle of wasted spending ....and they don't look out side the box. My 1st cost audit was in my 3rd yr in business. I did 10 more after that. Every February after we closed all previous yrs books we re-ran the numbers. It made me a lean profitable business. In this economy you HAVE TOO budget not only personal finances but business finances as well, and stick to that budget not varying off course and spending money on eye candy items and wants ..Only spend on your needs and stop buying crap you don't need or can live without.
 
tlw towing said:
Kenny your thinking about what you pay for heavy haul, say even 100,000 on hook only adds 200 dollars a year to the insurance. and your not going to be hauling doubles for AAA. And how many jobs do you know of these days that start at 10 dollars an hour? If you re read what I posted I covered everything from fuel to maintenance to workmans comp to insurance. I am using real world numbers based on my state of ohio. And I was just using this as an example. I looked at my policy and I do have 100,000 on hook and I pay 330.00 a month for 9 months. that's all. So go ahead and add 2 or 3 dollars an hour to my example and you would still be making money. And I don't need a computer program telling me I am making money when I can figure that up myself. If you study what I laid out you are making money. does not take rocket science to figure that out. And I also used 40.00 a call net. 33.00 is unrealistic that is probally the hook up fee not counting enroute or loaded. And what tax liabilities? If you show the IRS every dollar you bring in you wont be in business long. Back to you kenny if you cant make it making even 5,000 clear per truck I don't know what to tell ya your living to large buddy.
 
In Memory of Charlie Amann who said:
i run hard and i make money all motor clubs started 5yrs ago with 3 trucks now we have 15 trucks all motor clubs i reinvested the money in the business so i make money doin it too
 
wyomingotwpro said:
There are ways that you can deduct , depreciate , and write off...on your taxes. I never made any mention to the above quote , and never will. Any atempts to Cook da Books, is a risk you may choice to take, but not me, my freedom is not going to be taken away because of my need for greed and illegal business practice. Yes ur CPA may have some creative adjustments with in the letter of the law but im not gonna push that envelope.

Anyway..... I do not care who you are...Top Level Patron and Sponser on Tow 411, newby or old school tower, greenhorn business owner or United Freeking Road Towing Nationwide anybody ..YOU AINT MAKING PROFIT @ 33.00 OR @ 40.00 DOLLARS A CAR. You might make crap loads of money when u hide it from the irs and screw uncle sam his part''...You have lost ur mind to go out and buy 15, 20, 40 , 60 trucks at todays intrest rates on installment payment or one of those sucker i c u coming leases and haul for that cut throat rate.....

the comments in this post are mine and only mine which under the 1st amendment of our constitution are afford me be out spoken on this post...
 
tlw towing said:
Wyomingtowpro, I showed you that you can make money at the 40 dollar average. If your too blind to see it I cant help you. Obviously Charlie is making money. And you also put the cart before the horse and assumed someone run out and bought or leased 15 trucks. I know charlie and he is exactly like I am. You buy used, pay cash, and rebuild them from the ground up. A heck of a lot cheaper than payments. Its obvious you went down this road and failed hence the bitterness toward club work. The are folks who do club work and those who dont. Its all a choice that the individual makes. My company is growing, Charlies is growing, And my brother has been running AAA for 25 years so somebody must know how to make some money. And guess what we didnt need a program to tell us how to do it.
 
Maricle1 said:
From 50k to100k cost me 358.00 a year per Truck.On my heavy I carry 250k. My total premium for 12 months is over 16,000 for 5 trucks.For this state it's a good rate as I just shopped it and no one could match it.You'veer gotten a AAA call and the member was pulling a trailer?My drivers make 20.00 per hour and 25% after 6pm.Hell the guy that mops my shop floor makes 14.00 per hour.(And worth every dime)A employee being paid 14.00 p/h with matching with holding will cost the employer around 20.00 P/h .You example does not show all cost of doing business.And it doesn't take a ROCKET SCIENTIST to figure it out.(Office phone,cc processing,lights,cell phones for drivers,computers for the office and the list goes on)I'm not saying you can't make it on Motor clubs.I'm saying you have to be paid for what you do and what your worth.I do everything above board. I do not hide money from the IRS.They have no sense of humor,So you don't play games with them or you will not be in business long.As for me ,I will not be content making 5000.00 per truck,If I should have made 15,000 per truck.I charge for what I do and what I'm worth and what my guy's are worth and I've been pretty sucessful doing so.It's about MAKING it.It'sut GROWING AND PROSPERING.You can make it working at WalMart. AS FOR LIVING TOO LARGE,I DON"T THINK SO!! I own my equipment and shop and homes outright no bank note attached and I pay my help a wage, they can raise their families off of. And I even pay my TAXES and not try to cheat the goverment.In my opinion,It's people running for pennies, when they should be charging dollars that have hurt this industry and have forced many a great company out but that's for another topic.Bottom line is if your going to give examples, Give accurate, complete examples and if you don't know ask someone that does.Someone on here will know.........Kenny
Kenny Miracle
''Miracles Do Happen Here''
4cf1684fdf1bee71b58477f97563304a6b4b41c2
 
wyomingtowpro said:
Let me say up front ..I have never, and will never as an owner or (previous owner) worked for AAA or any other motorclub. My 13 years in business was not a failure, It was a choice to close it, when my wife was on her death bed in the hospital. And the long recovery was more important that making money. I feell very comfortable in my financial status in life, and choose to werk smart and not hard for a 40.00 reward. I relocated to Wyoming and started plans for retirement. Back in the early 70's my father was the owner of a large company in Nashville, rates were 17.50 local, in mid late 70's i can remember 22.50 and 25.00 per car. Rates went up over the years until in the late 80's AAA started this crap of dangling volume werk for cut throat rates. He never did it either. Now I know for a fact that there is a company in Nashville who is one of those AAA premium service vendors. He has 9 rollback, 5 self loaders, 1 med 1hvy, 1tator, 4 equipment haulers. I have heard he say, and i quote..." Need more werk," hard to make payroll, ect..This is because he chooses to work AAA at 23.oo starting rate. Brother those rate went out the window along with Disco, and urban cowboy fades.

I work as an employee in a place where everyone has AAA. We see about 250 to 300,000 visitors a year by car come thru here going to Yellowstone, and about 25,000 to 30,000 RV's a year. My employeer DOES DO ALL Motorclubs. BUT>>>>>>>>the start rate in 50.00 plus mileage. There are no sweetheart deals here, and even RV Plus rates @ 150.00 per hour to start. One motor club / dispatch forwarder CCM 55.00 plus 3.50 a mile one way.

Im a heavy duty operator, I do very little light duty towing , but in a bind ill jump in a truck and gogogo. The rates are "fair" Ive gone 3o miles out on a gas call it pays about (to the company) 137.50. I have told thge owner , if its a 40 dollar call and I'm on 30% dont wake me up at 2am for 12.00. That's some crap.....

I have alway been a believer that the business I own is just that , Its mine. I refuse to let ANY potential client or customer tell me what they are gonna pay me to do a job. If they need my service to do a job, they will be given a rate. If they don't like it, shove it. go find that guy that runs junk equipment, has untrained and non-certified drivers come work for you. Get paid for the job based on fairness not based on whatthey are willing to give you. They don't and never will have your best intrest at heart!!!

Everyone has the right to run their business as they see fit . If you are making money good for you. If you choice to buy junk equipment, rebuild junk equipment and do cut rate towing and be under insured or rite at the legal limit, good for you. You have to account for your time u spend in that business, and I place a great value on my time. You have spent a great deal of time werking on that junk equipment to make it road worthy , to do towing for A 40.00 rate that was obsolete in the early 90's. good for you. Best of luck in your business as you spend time turning wrenches, rebuilding junk equipment for that a 40.00 tow....
 
Unknown Member said:
My head hurts from all this reading,and we are at the same place in this discussion that we were in the beginning! Can't we all just get along?
 
wyomingtowpro said:
I can get along with any one, I'm not a Hater at all, but i also reserve my rite to speak my mind as does the other members on this post. I do feel that is not gonna change anything. In every industry you will always have some one who chooses to do a job cheaper. That's a trend nationwide. Why some people will work for almost nothing is beyond me but if it works for you by all means be that guy who cuts the rates to get he job or work for those customers who dictate how you run ur business by demanding or strong arming you to accept thier rates or not get the job. When you surcome to thier demand you might as well hand the the keys to everything you own, because they now run your business when you allow them to set your rates

.I just refuse to accept chump change for a job that should pay a fair market rate....
 
Randall L Dawson said:
Every time a tower finds out that doing motor club work is at best a break even venture and asks how to drop them , the same couple of " m/c cheer leaders " post how they make money doing m/c calls , which was NOT the question the gentleman asked. I'd prefer not to have to pay taxes either but , I don't want Bernie Madeoff as my roommate.
Please work safe, We've lost to many already this year. Randy.
 
Maricle1 said:
Yes Sir,I wonder if they are not the motor club reps sometimes or just have really bought into the BS that some clubs feed them.I actually do make some off of M/C calls though.Only because I refuse their rates and they agree to mine.I still face the same issues as everyone else that does club work.The ever present short pays!!!!!! Kenny
Kenny Miracle
''Miracles Do Happen Here''
4cf1684fdf1bee71b58477f97563304a6b4b41c2
 
 
jal70 said:
All,

A few items which are being left out of this post, which offer a slightly different viewpoint..... First, I would respectfully disagree with the original author of this topic in that mc business is a "habit". I am wondering if he is aware of the sheer volume of work globally that the mc industry represents?? Between CCMC, Signature, Geico, NSD, RAMC, Asurion and various others, estimated annual dispatch volume is in excess of 7.5 million episodes and this does not take into consideration AAA... It would be very difficult to imagine that this level of business is a habit or would simply evaporate, when you truly understand the value these products delivery to the clients. Additionally, much has been made about low rates as compared to retail, but again here the " entire" picture is not being painted for the community, so let me help. Most of the rates being discussed here are NOT the avg total invoice amount being paid for the service rendered, obviously we are all aware that typically club contracts offer a rate PLUS both en-route and loaded miles. When these amounts are paid for services over time, you will realize that the avg revenue per service is considerably higher than simply pointing out the base rate. Of course the mc industry is aware that the rates are not retail, however with the aformentioned dispatch episodes, we would be considered a corporate account in any industry, warranting some preferred rate be negociated between the parties. This is common practice in almost every business within automotive, towing and just about any B2B I can think of at the moment. Let us also not forget the opportunity that additional exposure to mc clients bring your businesses, for example to name a few: Driving repair shop refferals to your shop or perhaps a shop you may have a business arrangement with, opportunity to market your retail services to these customers, mobile battery sales, tire sales (commerical lines) , collision repair refferals, specialty vehicle towing (heavy , cycles), etc...

In the end, this is a business decision which must be made by knowing all the facts about your own operation and what type of accounts mc's can be. But let's please not paint all mc's with the same brush... As with towing operations, not all mc's are created equally....

Joseph
 
tlw towing said:
Joe, Its like this, Most dont realize between motor clubs and insurance control 60% or better of the tow volume. And Allstate is giving away memberships now that will bump the number up some. Its the evolution of the industry. Ever changing. Some of these guys will let evolution pass them by.
 
fairway said:
Yes, m/c's should be warranted a preffered rate, I would say it should be about 70 to 75% of the retail rate, not 30 to 40% like it is. What is a common % off of retail for wholesale customers? 25% or 65%? Also, the percentage off of retail should be based on the actual volume received, not promised. If you are feeding me one call a day, you should get less of a discount than a customer feeding me 15 calls a day. Also don't forget that along with the generous discounts and preferred rates, you are also not paying at the time of service.
 
Maricle1 said:
I agree motor clubs control a percentage of tow volume However,The real problem is many towers are naive and think they are making money at the low rates clubs pay.If all towers stood their ground and demanded a decent pay scale,The clubs would have no choice or they would go out as they would have no contractors doing their calls.The sad fact is they contract with other company's and pay their contractor less then half of what they collect in many cases.I contract with quite a few clubs but,only ones I can make a fair profit on.There is no sense in doing a call and only making 3-4 dollars profit,It's nuts!!!! I think we all understand clubs have to make a profit.Now they need to realize, we require profit to.Personally I dislike motor clubs,I feel like they are a cancer sucking the life out of the industry.Many calls that use to pay a decent rate like wrecks are now handled by motor clubs and a low ball rate.Dealership tows same thing.It just blows my mind at the number of towers, who just pucker up to these clubs and agree to do calls for less then half of retail on a promise of great volume.It just seems some of you THINK your making money, when in fact Clubs are taking MONEY right out of your pockets By involving themselves with accidents,Transports from storage yards,and such.They are tapping into the only real profit source we as towers have and putting OUR PROFIT IN THEIR POCKETS.Bottom line is they don't know your goals,overhead,or your business plan They shouldn't be dictating your rates.
Joe ,Since you do seem to have answers for everything.What is the AVERAGE profit clubs make per call ? I really don't think you'd let the clubs little secrets out.The clubs seem to have a pretty good idea how much profit we make so why is it a kept secret what they make?I'm pretty sure though,It's possible to pull up a financial for them that should show payouts and profits.
Kenny Miracle
''Miracles Do Happen Here''
4cf1684fdf1bee71b58477f97563304a6b4b41c2
 
Original Topic Creator Dtowingfl said:
Whoah, looks like this thread got a bit of discussion going! Thanks to everyone for their input and thoughts. For any who took offense, I wasnt intending to bash any M/C's, its just that as a stand alone tower with no repair facility or body shop, I have seen no way for us to make money running these $30 and under calls.

More importantly, I was stunned by the degree of denial that the owner was in and after investigating it a bit, it seems that many towers have the same mindset and have grown dependant on the M/C cashflow without understanding how detrimental it is to the health of their company. Finally it seems after making it clear that M/C's generate 30% of his revenue but encompass 60% of his expenses, he has finally stopped drinking the kool-aid and agreed to shed some overhead.

I'll resurrect this thread in 3 months or so and post the results from dropping over half our M/C business actually accomplishes. Wish me luck!
 
Falcon1 r53_1559570274.gif said:
I worked for a towing company that had over 75 units on the road, after a year of doing no M/C calls we noticed that we did less calls BUT that we were available for the retail customer! Calls were down, income did'nt change and profits were up!
 
DodgeTowGuy134 r54_1559570275.gif said:
Ok, I will chime in foe a brief moment, Wile I do TOTALLY agree with those who said that you need to know what your operating costs are, I agree with the Road America rep, that NOT all motor clubs are equal, as one club for one tower may be the best ever, they may be the worse for another tower that is many states away in a different region.

That said, I think that a business owner/accountant/office manager, SHOULD know the cost of doing business and know that is costs $$$ per call to do a call and even go as far as knowing that you need to make $$$ per mile/per minute, etc and then when calls come in base yates on your cost plus your profit margin to determine what you charge per call.

Now, with motor clubs, I agree that since they do send some volume and we can market other services to their custoomers, that they get a discount. A also agree with what was said that you have to also include not only the base rate of a call, but also the enroute/loaded mileages, cause if you get a very high enroute and/or loaded mileage rate, then it can offset a little lower on-scene rate, BUT...

I do agree with the other towers that the motor clubs should NOT strong arm us towers into things like including taxes in the base rate of a call, cause in our area we charge tax based on the county rate ans we service 5 counties, all with different rates and additionally, it is ILLEGAL for the tax to be included in the base rates of a call and tax MUST be calculated seperate and shown as such as according to state law. The exception is items such as gasoline and diesel fuel..

Additionally, I agree that motor clubs should get a discount, but NOT a 75% discount, as that is just too much.. They should get a 25% discount base and then if the volume over that month is really high, then they can get a higher discount for those calls due to increased volume sent to the tower. This was already stated by "fairway"..

Another thing about motor clubs, is that I TOTALLY DISAGREE with them putting in their contracts and "requiring" a tower to accept a certain percentage of calls from them and if they cant accept a call that it counts against a tower... Come On!!! Some days we the towers are running our rears off cause we are soo busy, and work is sometimes more than we can do or days without a call, so if we cant run a call for whatever reason, then sorry, but it should NOT count against a tower in a negative way and that in turn affects the overall rating of the tower and then the motor club sends lett business to the tower... cause during the blizzard we had here this winter, we had to take certain calls over others due to many reasons, from priority due to safety/location of the vehicle to be serviced, to it being a car stuck in the driveway of the custoomer isnt a high priority compared to a car that has a yound single mother with a newborn baby that slid off into the ditch...

I think that motor club reps SHOULD be polite and understanding and actually, really LISTEN to towers and not just blow them off, now some motor clubs reps do, but others dont, as I have my #1 motor club and their rep works with us, but another motor club we just dropped cause their rep was an overall "asshole" and he wouldnt listen to us and would ACTUALLY hang up on us, not return phone calls or emails, so we dropped them!...

So, this is my lil ramble on the subject to start my day off, now back to morning office stuff before the day gets rolling!

~later yall
 
tlw towing said:
I agree with you Dodgetowguy. They want you to do a certain percentage or your volume goes down. Had that happen to me also. I talked to my rep and due to me having the shop opening next week I decided to cut down some of my zips. I decided to do zips that keep me 30 minutes of my shop or about a 10 mile radius. That way acceptance will go up since I am one man and I wont be stretched to thin. On a brighter note I towed in an engine job to start on next week. Man I would have to do a lot of tows for the labor thats paying me.
 

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