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How To Start A Roadside Assistance Business

How To Start A Roadside Assistance Business

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How To Start A Roadside Assistance Business

How To Start A Roadside Assistance Business

Roadside assistance provides valuable help when people need it the most. For example, there’s nothing more frustrating than a flat tire or a dead battery when you have somewhere to be. Not to mention, car issues can leave people in less-than-ideal situations—such as being stranded on the side of a busy highway. Roadside assistance businesses are crucial for these customers and help to get them back on their way.   

While technical knowledge and hands-on experience are certainly important prerequisites for this business, they represent only a portion of what it takes to successfully launch and run your own roadside assistance operation. This guide will help you get up to speed on the industry, the steps needed to start, and answers to common questions.

Business Description

A roadside assistance service provides quick repairs or tows for inoperable vehicles. For example, roadside assistance businesses offer:

  • Towing
  • Flat-tire replacements
  • Fuel delivery or oil tank fill-ups
  • Dead battery jumps

In addition, roadside assistance businesses provide safety while repairing vehicles with the use of flares and lights to secure busy or risky areas.

Roadside assistance companies offer services as individual, one-time aid (such as towing) or as memberships with a handful of covered services included within a membership period. A membership plan is usually charged monthly or annually per vehicle as a flat fee.

Roadside assistance memberships are a common way people use roadside assistance and can often be purchased through automobile insurance for a low price.

Memberships include a handful of services like:

  • Towing up to a specified mile radius
  • Lockout services up to a specified amount
  • Flat tire changes
  • Complementary dead battery jumps
  • Complementary tire air refills

Industry Summary

The roadside assistance industry is an essential part of the broader automotive repair industry. It has seen consistent growth over the years, driven by the increasing number of vehicles on the road and the ever-present possibility of vehicular issues.

While current industry statistics are hard to find, a report by Fortune Business Insights showed that the U.S. roadside assistance industry generated $5.9 billion in 2021 and is projected to grow to $7.7 billion by 2029.

Staying abreast of industry trends is crucial for the success and sustainability of your roadside assistance business. A couple of current trends to be aware of include:

Emerging technology: The integration of technology into the roadside assistance industry has been a significant trend in recent years. GPS technology helps service providers locate customers quickly, while mobile apps enable customers to request assistance easily. The rise of electric vehicles (EVs) is also creating a demand for specialized roadside services for EVs.

Personalized services: Customers increasingly expect personalized services. This can range from the way you interact with them to the specific services you offer. For instance, some roadside assistance businesses are now providing services like transport of the driver to their next destination after a breakdown.

Target Market

The target market for a roadside assistance business is fairly broad, encompassing anyone who owns or regularly operates a motor vehicle. However, within this wide range, there are several specific segments that are especially relevant:

  1. Individual car owners: This is the most obvious target market. Every personal car owner is a potential customer, as all vehicles are susceptible to unexpected breakdowns or mishaps.
  2. Fleet owners: These can include corporate entities, car rental companies, ride-hailing services, and delivery businesses that own multiple vehicles. Fleet owners often require roadside assistance services to ensure minimal disruption in their operations due to vehicle breakdowns.
  3. Motorcycle owners: Roadside assistance isn’t just for four-wheeled vehicles. Motorcycle riders, too, can find themselves in need of assistance, whether it’s for a flat tire, an empty gas tank, or some other issue.
  4. RV and motorhome owners: These large vehicles can be especially challenging to manage in the case of roadside problems, creating a specific demand for roadside assistance services.
  5. Truck drivers and trucking companies: Given the long distances covered by trucks and the heavy wear and tear they experience, the demand for roadside assistance services in this segment can be significant.
  6. Insurance companies: Many insurance companies offer roadside assistance as part of their coverage and often outsource these services to independent roadside assistance companies.
  7. Local businesses and institutions: Local businesses with delivery services, schools, or other institutions with their own fleet of vehicles can also be considered a target market.

In order to best target your market, it’s essential to understand the specific needs of these various segments and to tailor your marketing and service offerings accordingly. It can also be beneficial to narrow down your focus based on geographic area, the types of vehicles you are best equipped to handle, and the specific services you wish to provide.

Checklist To Start A Roadside Assistance Service

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Starting your own roadside assistance business can be an exciting venture, but it’s important to be prepared before jumping in. Here is a list of common steps to consider before starting your business.

Step 1: Research the Market

Understanding the market demand for your business is a crucial step before investing your time, money, and effort in a roadside assistance venture. Knowing whether there’s enough demand allows you to make informed decisions about the potential success and profitability of your business.

To research the demand for a roadside assistance business, you can use several strategies and resources:

Local market research: Conduct thorough market research to understand the demand for roadside assistance services in your chosen area. This includes assessing the number of motorists, the frequency of roadside incidents, and the existing service providers in the area.

Competitor analysis: Analyze your competitors, their service offerings, their customer base, and their market reach. This can give you insights into the market saturation and potential gaps in the market that your business can fill.

Surveys and questionnaires: Directly ask potential commercial customers such as insurance agencies about their needs and expectations. Online surveys or face-to-face interviews can help gather data about how often people need roadside assistance services, what services they need most, and how much they’re willing to pay.

Online research: Use online tools and platforms to gauge demand. Google Trends, for example, can show how often people in your area search for roadside assistance. Social media platforms can also provide insights into how often people are looking for such services and their experiences with existing providers.

Industry associations and publications: Groups like the American Automobile Association (AAA) or the Towing and Recovery Association of America (TRAA) often publish reports and statistics related to the industry. These can provide valuable insights into the demand and trends in the roadside assistance market.

While high demand is a positive sign, it also often means increased competition. Your business plan should factor in both demand and competition to create a strategy that allows your business to provide a unique value proposition to your customers.

Step 2: Create a Business Plan

Writing a business plan for a roadside assistance business is a necessary step because it serves as not only a roadmap guiding your operations and decision-making processes, but it is used by leders when evaluating a business loan.

There are many important sections in a business plan, but lenders will typically spend the most time on the following:

Business model and services: This section outlines the specific services your roadside assistance business will offer and how it will operate. It’s essential to clearly define whether you’ll be offering basic services like tire changes and jump-starts, or more specialized services like locksmith services or heavy-duty towing. This section should also cover whether your business will operate independently or as part of a national network.

Market analysis and strategy: A comprehensive market analysis section demonstrates your understanding of the market and how your business will fit into it. This should include a detailed analysis of your potential customers, your competitors, and any industry trends or factors that could impact your business. Your marketing strategy should explain how you intend to reach your target market and differentiate your business from the competition.

Operations and management plan: In this section, you should detail your operational plans, including the geographic area you will cover, your hours of operation, and your plans for staffing and training. You should also outline your management structure and any key personnel, along with the experience of the team.

Financial projections: Your financial projections give lenders a clear picture of your business’s economic prospects. This section should include a sales forecast, a profit and loss statement, and a cash flow statement. For a roadside assistance business, it’s particularly important to account for the costs associated with vehicles, equipment, and insurance.

In all these sections, remember to be as specific and detailed as possible to demonstrate a comprehensive understanding of your business and its market. By doing so, you’ll increase your chances of securing the necessary funding.

Related: How to write a business plan

Step 3: Secure Funding

After verifying that a market exists and a business plan completed, it’s time to make sure you have the money to start the business. There are a few sources of funding that are commonly available to roadside assistance businesses. A few of these include:

Personal savings provide an immediate source of capital and demonstrate to potential investors or lenders the owner’s confidence and commitment to the business.

Loans from friends and family are another common source of funding, often offering more flexible terms than traditional lenders.

For those seeking larger amounts of capital, banks and credit unions offer business loans and commercial vehicle loans. These usually require a solid business plan, good credit history, and personal investment, but they offer larger amounts of capital and longer repayment terms. In some cases, a lender will require a loan guarantee from the Small Business Administration (SBA) in order to secure the loan.

Related: Finding the money to start a business

Step 4: Apply for Business Licenses and Permits

Starting a roadside assistance business involves a series of legal and administrative steps. The exact processes may vary from state to state, but here’s a general guide to get you started:

Choose a business structure: Before you register your business, you’ll need to decide on a business structure. For roadside assistance businesses, the most common structures are sole proprietorship, partnership, or Limited Liability Company (LLC). The latter is often chosen for its flexibility, ease of set-up, and the personal liability protection it offers.

Related: Comparison of business structures

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain business licenses and permits: The licenses and permits required will depend on your location and the specifics of your business. At a minimum, you’ll likely need a general business license, sales tax permit, and Employer Identification Number. Also, if providing towing services, a tow truck operator license and Class B license will be required for all drivers.

Related: Common business licenses, permits, and registrations by state

Zoning: Ensure that your business location (if you have one beyond a home office) and parking arrangements for your service vehicles comply with local zoning laws. Some residential areas have restrictions on running a business or parking commercial vehicles.

It’s important to research what is required in your state so you can ensure your business is compliant. Operating without the necessary licenses can result in fines and even closure.

Step 5: Purchase Equipment

Purchasing equipment for your roadside assistance business is a critical step. The right equipment can increase your efficiency, enhance your service offerings, and affect your overall profitability.

Here are a few factors to consider:

Nature of services: The type of services you plan to offer will dictate the kind of equipment you need. If you’re offering basic services like tire changes and jump-starts, you’ll need a different set of tools compared to someone offering more comprehensive services like towing or vehicle recovery.

Quality of equipment: Opt for high-quality, durable equipment that can withstand heavy use. While these items may be more expensive initially, they can save you money in the long term by reducing the need for frequent replacements or repairs.

Essential equipment: Certain equipment will be indispensable for any roadside assistance business. This may include items like a reliable service vehicle, a hydraulic jack, air compressor, battery jump starter, tire changing tools, and a variety of basic hand tools.

Specialized equipment: If you’re offering more specialized services, you’ll need to invest in additional equipment. For towing services, you’ll need a tow truck, which is a significant investment. For lockout services, you’ll need a variety of professional lockout tools.

New vs. used equipment: Decide whether to buy new or used equipment. While new equipment comes with warranties and is often more reliable, used equipment can be a cost-effective choice if you’re starting with a limited budget.

Safety equipment: Don’t forget about safety equipment. Cones, high-visibility clothing, and first-aid kits are important to ensure both your safety and the safety of your customers.

Step 6: Obtain Business Insurance

When it comes to running a roadside service business, it can be easy to overlook the importance of insurance coverage. However, being properly insured protects both you and your clients in case of accidents or damage.

Some types of insurance to consider include general liability, which covers any injuries or property damage that may occur during a roadside assistance call. It’s also important to have vehicle insurance for any company vehicles used for tow trucks or service vehicles. And if your business offers services such as lockouts or jump starts, make sure to have coverage for any potential damage to customers’ vehicles.

In addition, having workers’ compensation insurance is essential for protecting employees who may be injured on the job. By taking the time to investigate and invest in the right insurance policies, you can ensure the smooth operation and protection of your roadside assistance business.

We recommend getting at least three quotes, including local insurance agents and online providers like Coverwallet or Hiscox to get the best coverage and price.

Step 7: Develop a Marketing Strategy

Marketing expenses for roadside assistance businesses can vary depending on the method and whether the marketing is kept in-house or hire a professional marketer.

Having a well-designed website is essential, as it lends credibility to your business and serves as a point of contact for potential customers seeking your services online. Pairing the website with social media platforms such as Facebook, Instagram, and Twitter are powerful marketing tools and don’t require too much money to establish.

Word-of-mouth marketing is key to getting new clients but it takes a while to show the quality of your work to customers, but to help get a jump start, encouraging satisfied customers to leave reviews on platforms like Yelp or Google My Business will attract new customers, as positive reviews can significantly influence consumers’ decisions.

Last, forming partnerships with local gas stations, auto repair garages, car dealerships and vehicle insurance providers can result in referrals and provide another effective marketing channel. Another option is to join a national roadside assistance program, allowing customers to easily access your services through membership benefits. Even though the revenue per stop will be less, the volume should make up for it.

Related: Low-cost ideas to market a new business

Step 8: Hire and Train Staff

While a roadside assistance business can be operated by just the business owner, hiring staff can help to service more customers. When it comes to hiring employees for a roadside assistance business, it’s important to look for individuals with specific skills and characteristics.

First and foremost, they should possess strong problem-solving abilities and quick thinking in order to handle emergencies on the side of the road. A good work ethic and physical stamina are also critical since roadside assistance often involves long hours and strenuous tasks such as changing tires or jumpstarting cars. Additionally, it’s advantageous for employees to have a solid knowledge of auto mechanics, as well as basic first aid training.

Last, good customer service skills are crucial in any job, but especially in a roadside assistance role where your employees may interact directly with distressed individuals in need of help.

Each state has different regulations and requirements when it comes to hiring employees, so be sure to familiarize yourself with these to ensure compliance.

Related: Guide to hiring in each state

Step 9: Prepare to Launch!

We have gone over the most common steps to consider when starting a roadside assistance business, and everyone will need to tailor their steps to for their specific business model, target market, and local regulations.. As you prepare to officially launch there are likely going to be a few other crucial steps left to take. A few of these may include:

Set up a bookkeeping system: Establishing a system for tracking income, expenses, and overall business financial health is crucial. This can be as simple as using a spreadsheet or as complex as utilizing accounting software like Wave Accounting (FREE) or Quickbooks. If doing your own bookkeeping and taxes isn’t your thing, consider hiring an accountant to help.

Create contracts: In the roadside assistance industry, specific contracts may be needed, like service contracts with clients or contracts with tow truck operators. These will outline the terms of service and expectations on both sides.  RocketLawyer and Law Depot have free and inexpensive templates that may be helpful, but always consult with a lawyer to ensure your business interests are protected.

Open a bank account: Open a business bank account separate from your personal account. This will make it easier to track business income and expenses and provide a clearer picture of your business’s financial health.

Set pricing: Decide on your pricing structure. Research what other roadside assistance businesses are charging, and consider factors like your costs, desired profit margins, and what your target market is willing to pay.

Accept credit cards: Choose a system for accepting payments, including credit cards. There are many options, from traditional merchant accounts to digital solutions like Square or Stripe.

This material is property of StartingYourBusiness.com

Greg’s Tip: Be sure to invest in reliable equipment from the start. Skimping on equipment can lead to breakdowns, slow service, and unhappy customers.

Greg's Business Tip

Common Questions When Starting A Roadside Assistance Business

How much does it cost to start a roadside assistance business?

Starting a roadside assistance business can vary greatly in cost depending on several factors, such as the scope of services offered, and geographic location. In general, you can expect initial start-up costs to range from $10,000 to $50,000, as broken down below.

Initial costs: These include expenses such as purchasing a service vehicle (which can range from $5,000 for a used vehicle to over $30,000 for a new, outfitted one), tools and equipment (typically around $1,000 to $5,000), and any necessary permits or licenses (which can vary widely by location, but often amount to a few hundred dollars).

Insurance: Commercial auto insurance, liability insurance, and workers’ compensation insurance are all necessary. The costs can vary based on factors like your location, the number of employees, and the type and number of vehicles you have. As a rough estimate, insurance costs could be in the range of $1,000 to $2,000 per year for each vehicle.

Operating expenses: These include ongoing costs such as fuel, vehicle maintenance and repairs, marketing, office expenses, and employee salaries if applicable. These costs can be difficult to estimate, as they depend on a number of factors including how much you use your vehicle, how effectively you can market your business, and how many calls you get. However, having three to six months of operating expenses on hand can provide a safety net during the early stages of your business.

Remember, these costs can vary widely based on many factors, and it’s always a good idea to speak with other business owners in the industry or consult with a business advisor to get a more accurate estimate for your specific situation.

How profitable is a roadside assistance business?

The profitability of a roadside assistance business can vary widely based on factors such as the number of service calls, pricing, operating costs, and the efficiency of the business operations. As a hypothetical example, let’s consider a roadside assistance business that handles about five service calls a day.

If the average charge per service call is $60, the daily revenue would be $300. Over the course of a month (assuming 30 days), this translates to a revenue of $9,000.

Operating expenses can include fuel, maintenance and repairs, insurance, marketing costs, and potentially employee wages. Let’s say these amount to $4,000 a month.

Therefore, the gross profit before taxes would be $5,000 a month or $60,000 annually.

This figure doesn’t account for taxes and potential fluctuations in business volume. Also, keep in mind that these are approximate figures and actual results can significantly vary.

What skills are needed to run a roadside assistance business?

A roadside assistance business doesn’t require a specialized degree or certificate, but it does require some key skills to maintain success.

Car repair knowledge: While going out on calls to assist drivers, you will need to know how to correctly hook up a car to be towed, change a tire, fill a gas or oil tank, or be able to retrieve a key locked inside a car. As your business grows, you may hire employees who already know how to do these things, but it is also possible that you may need to train them.

Organization: You must be able to coordinate your calls and schedule to meet your client’s needs and optimize your schedule to reduce wasting gas and time. As your business expands to add employees, you will also need to manage your driver’s schedules. Being organized will also help you to effectively train and oversee your employees.

Marketing: Your business needs clients—marketing is an important tool to gain those clients. Without customers calling for assistance, your business is without revenue. So, successful marketing and ad campaigns are important to draw in customers.

What is the NAICS code for a roadside assistance business?

The NAICS code for a roadside assistance business is 488410, which is classified under Motor Vehicle Towing.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

How To Start A Roadside Assistance Business

How To Start A Roadside Assistance Business

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