How to Open a Gym: Your Step by Step Guide (2024)
June 12, 2020
June 12, 2020
Do you love fitness and think “Wouldn’t it be awesome to open my own gym?” In an exclusive interview with the founder of Lab Athletics based in Bellingham, Washington, we asked Jake Brog to share his story.
As Jake’s launch demonstrates, creating your own fitness brand shouldn’t require you to invest hundreds of thousands of dollars. Best of all, Jake opened his gym business using nothing more than a credit card. Not only was his launch a success, but he was able to pay off his debt without paying any interest.
Following steps taken by Jake, you can learn how to start a gym from scratch.
Jake is not a serial entrepreneur. Like many young adults, he worked several different jobs before realizing his two passions in life – helping others and fitness.
Unlike some gym owners, Jake Brog did not initially think to himself, “I want to start my own gym.” As you’ll see, that desire came later.
At first, he became a volunteer firefighter. To pay his bills, Jake was a personal trainer and did fitness instructing on the side. Within months, he was managing the gym’s coaching staff and all the core tasks associated with running a fitness facility. Before long, he knew he’d found his professional calling – to open a gym of his own.
Watch the full interview with Jake here:
Even if your gym trains you as an instructor, you should consider training from an accredited, third-party organization. There are a number of highly-reputed agencies that offer fitness instructor certifications. Among them are:
And the best part about becoming a certified fitness instructor or personal trainer is that it costs much less than other forms of training. When you are ready to start a gym business, you’ll have all the expertise you need without having to spend $20,000-50,000+ on a formal, college education.
The U.S. Bureau of Labor Statistics notes that fitness instructors are in high demand, with jobs expected to increase by 13% over the next eight years.
If you’re thinking seriously about opening a gym, you should apply for a job as a fitness instructor at a local facility.
Jake worked hard at his fitness job, and before long, the gym promoted him. He quickly gained leadership skills like time management, budgeting, delegation, and conflict resolution. These skills helped Jake to not just open a gym but to also run a gym well.
Like any business startup, launching a fitness facility costs money. Taking the time to itemize every cost of opening a gym can help you create a plan for launch and profitability.
You don’t have to start your own gym. there are plenty of opportunities to buy a gym or a franchise if you’d prefer.
Startup expenses are one-time costs. Here are some common startup costs associated with opening a gym:
In contrast, operating costs are ongoing expenses. These costs usually entail the following:
The operating cost of starting a gym usually involves both variable and fixed expenses.
Your fixed costs remain the same month-after-month, such as rent and utilities.
Variable costs increase as you get more clients. For example, more clients mean more wear and tear on your equipment, and this could increase your equipment replacement costs.
Jake noted that some expenses took him by surprise. Like most business owners, he realized he needed insurance. Without insurance, he risked losing his business completely should a tragedy occur. If you need commercial insurance, get a quote here.
Fitness flooring is another business expense that new gym owners don’t often think about when building their business plan. Soft flooring is important because it reduces the risk of injury for yourself and your students.
The more you spend, the harder it will be for your gym business to last.
That said, be careful about sacrificing quality for a lower price. If paying too little for certain kinds of equipment will only force you to replace that equipment later, it will end up costing you more money in the long run.
A danger that many gym startups encounter is succumbing to the pressure to find a commercial or shopping center storefront. According to Jake,
Reflecting on his decision to lease in an industrial area, Jake says,
Jake started his gym in a single industrial storage bay with a few hundred square feet. The smaller area allowed him to pay less for rent and more on quality equipment.
When opening a gym, it’s not important to do everything. Instead, figure out what you need in order to succeed.
When you start small, you can grow gradually with the confidence that increasing your space and equipment will generate profits right away. Today, Jake leases four bays and is already needing more space to keep up with demand.
Poor-quality equipment will require you to replace it sooner. Additionally, bad equipment increases your risk of injury and can lower results for your clients.
Because of its high quality, Jake’s favorite equipment brand is Rogue Fitness. And because Jake saved money on rent, he was able to invest in top-level equipment.
When you start your own gym, keep in mind that there are certain costs that you should not cut corners on. Don’t be afraid to spend a little extra if you are confident that it will be a worthy, long-term investment.
Jake did not have $10,000 just lying around. What he did have were determination and great personal credit.
After deciding to open his own gym, Jake created a business plan. Initially, he built his gym business plan hoping that it would help him secure a business loan.
Even without a loan, Jake’s gym business plan did force him to do his homework. In his plan, he outlined the following key sections:
For most small businesses, writing a business plan allows you to pitch lenders and investors. While not every gym requires outside funding, an extra injection of cash can help you build your business faster.
For a detailed example of a business plan, check out the SBA’s business plan page here.
In Jake’s case, no amount of business planning would open doors for him to get a traditional business loan.
“What I found out is: the business plan is awesome, but in the real world, the banks are like, ‘We’re probably not going to loan you any money because you have no skills in business.’”
The truth is that most business startups usually can’t get a traditional business loan. Even the SBA prefers to qualify businesses that have existed for a few years and have already demonstrated their ability to create profits.
Since a traditional business loan was out of the question, Jake got creative. Due to his good credit score, Jake qualified for a credit card with a 0% introductory interest rate.
And here’s the kicker. Having built a solid business plan, Jake knew that he had a good chance of making enough sales so that he could pay off his credit card debt before he would accrue any interest charges.
Jake’s financial projections helped him establish realistic financial goals. Within months, not only was he successfully paying all his bills, but he was generating a modest profit.
If you’re considering buying an existing gym, make sure you you go through the following questions, which are critical to understand whether or not an existing business can meet your financial goals.
Any fitness business must decide what they offer clients and how much they must charge.
In our interview with Jake, he outlined different types of gym services. Typically, your gym should offer one or more of the following:
According to Jake, the most lucrative fitness pricing model is the large group class. That said, the larger the group, the more concerned you must be about the safety of your customers.
If your fitness approach involves low-risk exercises (such as those movements that do not involve heavy equipment), your classes can be larger. This model allows you to generate profits faster.
In Jake’s case, he chose the CrossFit model. While he does a lot of group classes, he knows that he must keep classes smaller. This approach also affects how he prices his memberships. Jake noted,
He arrived at this number after calculating realistic financial goals based on his costs and the value he brought to the local fitness market.
Over the course of his first year in business, Jake invested between $15,000-20,000.
Jake’s personal bills and debt were very low, and his low cost of living further helped him break-even. After ten clients, he was paying his bills with a little extra to spare.
You should also know how many clients/memberships your gym needs to be paying your bills. If you go too long and are unable to keep up with your costs, it will be much harder to stay in business and eventually enjoy those profits!
After you’ve broken even, your next goal should be to seek higher levels of profitability. To help them achieve profitability faster, most gym owners don’t take a paycheck right away.
Once generating a profit, Jake’s first priority was to lower his debt. Since he had only so many months before his 0% interest promotion would run out, he committed himself to pay off his credit card as soon as possible.
After generating a profit, your final goal should be sustainability. When you feel confident that your business can sustainably generate a profit, you can begin to enjoy greater perks.
Sustainability ensures that you have a regular paycheck (how much you make depends upon your financial goals). Additionally, financial freedom can allow you to hire employees so that you as the gym owner can have more time for yourself and your family.
Today, Lab Athletics employs five people, and Jake is able to focus on more big picture decisions, such as how to grow his brand as a gym owner.
You should never build one gym that fits every type of client. Like any small business, you should have specific kinds of people in mind in your community.
By defining who your target audience is, you can better understand what your customers need and how to deliver value to them.
Jake knew that his approach to fitness catered to an audience with more financial resources.
This insight helped Jake create a strong pricing model, as well as tailor his training to those with a certain budget.
Your gym will typically serve an ideal age range. Because we all tend to lose functionality with age, your fitness model may be better suited for those that are older, younger, or middle-aged.
In Jake’s case, he specialized in helping middle-aged adults that are in generally good health. These ideal customers had known what it was like to be in amazing shape, and they wanted more than “general good health.”
When opening a gym, the mindset of your clientele will determine whether or not you can succeed. Fitness facilities need customers that are driven and know what they want. Oftentimes, those people just need a little direction and incentive.
While Jake enjoys marketing and advertising, he knew that to succeed, his gym needed referral power.
Obviously, no one will refer friends and family to your business if your services are mediocre. When you get your first batch of clients, you must pay attention to their wants, needs, feedback, and results.
When your customers are happy, they’re more likely to refer others. You can also offer discounts to your clients for referring their friends/family.
If feedback and results are negative, you may need to make some adjustments.
Especially in the digital space, negative reviews are sometimes unfairly accusatory. When you receive negative feedback, it’s important that you listen to the criticism and look for opportunities to improve your gym.
Above all, never attack critics. Instead, thank them, offer them a gift, ask probing questions, and commit to (realistic) changes. Even if you can’t win back an angry client, others will see your response and want to give you their business.
Social media pay-per-click (PPC) ads became one of Jake’s favorite mediums once he had achieved sufficient word of mouth for his gym. For middle-aged audiences, Facebook ads are among the best-performing in the fitness industry.
You want to make sure your gym members to keep coming back. Not only is it important that you teach consistency, but you must also earn trust with your customers by delivering results.
Jake and his team know that when clients see results – weight loss, bulk, or increased physical functionality – they will keep coming back.
It is a proven fact in economics that constantly chasing new customers will cost you more money than retaining as many of your members as possible.
Since repetition is the key to results in fitness, creating ways to remind your clients to stay consistent should be part of your gym’s services. This could include encouragement during training sessions, follow-up phone calls, or even email newsletters.
At Jake’s gym, they showcase successful clients on a wall to inspire other members to persist toward their fitness goals.
Jake warns against jumping too fast towards a multi-location strategy.
The fewer the costs you have to manage in your gym business, the easier it is to “ramp-up” (that is, break even with your costs and become profitable). In the fitness industry, it can take large gyms several years before they generate a profit simply because they started in too big a space.
If you find an industrial location with the potential for slow expansion, you can build out your gym smarter, just as Jake did.
In your current location, think about ways to exhaust its potential. Jake says,
If you have the time and employees to facilitate extended workout hours, you can cater to those that prefer to workout at different times of the day, including early morning or later in the evening.
With each new fitness center location, you will have to sign a new lease, pay more in utilities, and fill with equipment. It many ways, it’s like starting a gym all over again. Jake advises,
Before you establish a new location, make sure that demand justifies the investment and that you’ve filled the space you currently occupy.
If you think at some point you’d want to sell your business, scaling too quickly could negatively impact the value of your business.
Once your gym is a success, you should look for big and small ways to replicate it.
You and your team are worth investing in greater knowledge and fitness skills. Qualifying your staff to do more with less is a great way to increase your sales and lower your costs.
Jake also found that investing in a coach did wonders for his gym business and him as a gym owner.
Jake’s favorite book is The eMyth because it ultimately inspired him to open his own gym. Reading instructional and motivational books by experts can enhance your skills and improve your mindset.
At the end of the day, you are the one that must take calculated risks. When asked what advice he would give to those thinking, Should I start my own gym? – Jake Brog insists, “Do it! Just go for it!”
It worked for Jake, and it can work for you, too.
Brandon Boushy
Want to start earning a passive income? People still need cash and learning how to start an ATM business (ATM means automatic teller machine) can be a great way to make a passive income. Take it from someone who is already an ATM owner.
[su_quote]I was a cop working 60 to 80 hours a week and neglecting my family. My back was really against the wall. I decided to start an ATM business to start earning passive income.[/su_quote]
From starting a side business in 2017, Paul Alex grew to $15 million in annual revenue with his company ATM Together. Now, he helps people automate their own ATM businesses. He makes it easy to:
[su_note note_color="#dbeafc"]
Don’t worry if you don’t know what all these are right now. You will by the time we explain how to own an ATM. We’ll cover all of the following, and you can click to jump to the sections that interest you most:
Starting an ATM business requires a simple seven-step process:
Find out how to start an ATM business by following the steps below.
Starting an ATM business will require understanding the ATM industry. We’ve got you covered with the information you need to become an independent ATM deployer. We’ll answer ATM industry questions like:
Starting an ATM business isn’t expensive. Paul told us:
[su_quote]You can start an ATM business for under $6,000.[/su_quote]
He broke the costs down to:
• ATM Cost: $2,100
• Limited Liability Company: Under $1,000
• Business license: Under $1,000
• Internet modem: $150
• Internet service: $7 per month
• Tools: $300-$500
• Gas: 65.5 cents per mile using IRS Mileage Rate
• ATM liability insurance: Under $1,000
Your ATM investment earns approximately $9 to $15 per day according to Paul. That converts to $3,285 to $5,475 annually or $456.25 monthly at $2 per transaction.
Paul also told us:
[su_quote]You can add toppers and sell ad space to earn an additional $50 to $250 per location each month.[/su_quote]
That means to make the $15 million annual revenue he earns, you would need approximately 4,600 ATM machines. Don’t worry, you can start off with one ATM and build from there.
Check out the rest of the interview with Paul.
Running an ATM business will take different amounts of time depending on the strategies you use. If you manage all your ATMs yourself, it will take your drive time plus up to 15 minutes to fill each machine.
But Paul told us you can hire employees or pay other companies to do it for you. That makes owning ATM machines completely passive income.
The average ATM may hold up to $200K, but you might not want that much cash in your ATM at any time. Many machines keep less than $10K in the machine at any time.
Depending on the manufacturer and the bills in the machine, you will have between one and four dispensing cassettes that hold 1,000 to 4,000 bills each. That means in rare scenarios, an ATM could hold up to $1.6M.
Next, you’ll want to create an ATM business plan to document how your ATM company will operate. A successful ATM business plan will include the following sections:
Check out our article on writing a business plan for more information.
There are certain things that every ATM operator will need to do run a successful ATM business. You’ll need to:
Keep reading for more resources about starting an ATM business.
You’ll want to consider the name for your ATM business carefully because it will represent your brand for the lifetime of the company.
Some tips for choosing a memorable name for an ATM business include:
Paul told us:
[su_quote]I wanted to help people build small businesses with ATM machines, so I named it ATM Together because we work together to help the business owners succeed.[/su_quote]
Check out our article about naming a small business for more information on choosing a name.
Next, you’ll need a legal business structure for your ATM business. You’ll go to the Secretary of State and register the business name in each state where you’ll provide ATM machines.
Paul told us:
[su_quote]You want to register as a limited liability company.[/su_quote]
Want to know more about how the business model impacts ATM providers? Consider the following.
While most businesses use these five structures to start an ATM business, there are plenty of other models for your business venture.
Next, we’ll discuss business licenses.
You’ll need an ATM business permit to comply with local requirements and zoning codes. Check with your city for the inspection requirements because each state and municipality has its own requirements. You may also need:
You will also need bank accounts for an ATM machine to accept credit or debit card transactions.
You’ll need a business bank account for your ATM machine to deposit the funds that people transfer from their bank account. Unfortunately, many ATM machine businesses have trouble finding a bank to work with.
That’s because an ATM machine requires lots of cash, which means that the bank has to do more work. The ATM business bank account will also normally have low balances, which makes it harder to earn money on the interest.
ATM Together helps you find banks that are ATM business-friendly, or you can check out the list of banks suggested by ATM Depot.
Using other banking products, like a small business loan, business credit card, and money market account may help convince banks to be more friendly to your ATM business.
You’ll want small business insurance to operate an ATM business. Some of the risks you’ll want to consider include lawsuits and theft of machines or cash. Most of these will be covered in a Business Owners Plan (BOP).
Other common small business insurance policies your ATM business may want include:
You can learn more about small business insurance or reach out to Simply Business to get an insurance quote from 16 small business insurance companies.
You’ll need to find locations to place your ATMs. Some popular places for ATM locations include:
You’ll need to buy ATM machines and other equipment to start an ATM business. Every ATM business will need:
Paul uses Hyosung Halo 2 machines and Bitcoin ATMs. Plus you can buy full routes and add toppers to sell ad space for $50 to $250 per location.
You’ll need to install all your machines in their new locations. Plus you’ll have to operate them by restocking money routinely. We’ll look at each of these next.
To install an ATM machine, you’ll need to:
Buying an ATM will require some learning during the cash machine setup. Paul suggested:
[su_quote]Program the ATM at your home or office so that you can learn what you’re doing privately.[/su_quote]
One of the things you’ll need to consider about how to start an ATM machine business is how you will refill the machines. You have three main options:
Let’s look at each of these to understand how to get ATM machines refilled.
When you first start an ATM business, you’ll want to keep startup costs low. The easiest way to do that is to do all the work yourself. That means you’ll need to learn how to work on ATM machines and how to refill ATM machines.
Paul told us:
[su_quote]Make sure to switch up your schedule. You don’t want to have a set routine because that makes it where people can plan to rob you easier.[/su_quote]
If you track each machine individually, you should be able to tell when it is getting low and go refill it. Then refill any of the ones that are on the way to it. Next time reverse the order.
Paul told us:
[su_quote]You should hire someone to manage the ATM machines once you get to 10 ATM machines.[/su_quote]
But which option is better: hiring a vaulter or hiring employees?
Vaulting services are companies that manage the refilling of your ATM for you. First National ATM provides a great overview of how to start an ATM business with no money using a vaulter.
They use the following ATM price example:
Monthly Service Fees per ATM
• Cash lending fee: Prime rate + 4 points
• Cash management fee: 3 cents per transaction
• Cash Insurance: $25 insurance on vault cash
• Armored courier: $80 per trip
They subtract those costs from the monthly revenue, which they assume will be $3 per transaction and 500 transactions per month. Effectively, their example means you are paying approximately 17% of revenue to operate the machines. That sounds way better than doing it yourself or managing employees if you want passive income.
But what does it take to hire employees?
If you want to be more active in providing ATM services, you can hire employees. This business strategy would work if you are particularly good at multiple aspects of the ATM business.
For instance, ATM Together helps people get their first ATM machine location, automate the business income, and find ATM technicians.
In general, the operating costs will be higher if you hire employees because you’ll have to implement time tracking, payroll systems, and other types of ongoing expenses.
When you hire employees, you’ll need to:
We go into more detail on hiring in other blogs. Whether you DIY, contract a vaulter, or hire, there’s still a lot to do to become a successful business. Read on for a play-by-play for growing your ATM business.
In addition to the initial equipment costs, finding a financial institution to work with, and placing and supporting your first machine, you’ll want to grow the ATM business because you’ll probably want to build more income than the couple hundred dollars you make on the first machine.
You’ll want to:
At a minimum you’ll want to create an ATM website with the following pages:
These pages will help your target market understand what you do, how you do it, and how much you charge as an independent sales organization. Learn more about website building.
As you make money, you’ll want to find more ATMs for sale so you can buy them and make more surcharges from the transaction fees. You might also want to make an ATM purchase to sell to people who want to manage their own ATM.
ATM Together makes it really easy to make a profit when you buy ATM machines at wholesale and then provide the ATM machine for sale. You can charge a one-time fee or monthly fees if you provide support to your customers.
An ATM topper is a screen that attaches to the top of an ATM to diversify your income stream. With an ATM your primary revenue is from surcharge revenue, but an ATM topper lets you earn revenue from ad views.
You can use the ads to promote your own products and companies, products and services in the store, or even outside businesses that the target market might like.
Paul told us:
[su_quote]You can make $50 to $250 per machine depending on the foot traffic.[/su_quote]
Check out how the Smartcast ATM Topper works.
[su_youtube url="https://www.youtube.com/watch?v=oVzIcWosp3w"]Credit card processing fees are a portion of your ongoing expenses. If you’re doing all this yourself, you could pay as much as 2.9% + 10 cents per transaction fee.
Meanwhile, other processors claim they can provide free payment processing. I assume the credit card costs are baked into the prices of other services they offer. See the picture below to see places where ATM Together might make profits that cover the processing network.
Reducing the fees can impact how much cash you have to buy more ATM machines. There may be other ways to save money, like outsourcing the maintenance of your machines or providing cash to vaulters to earn a percentage of their returns.
Let’s say you’re paying a Stripe processing fee of $2.9% + 10 cents per transaction, but by joining ATM Together, you pay 0% and $0 per transaction.
Number of transactions | 2.9% fee assuming $100 per transaction | 10-cent fee | Total savings by switching |
1 | $2.90 | $0.10 |
$3.00 |
10 |
$29.00 | $1.00 | $30.00 |
100 |
$290.00 | $10.00 | $300.00 |
1000 |
$2,900.00 | $100.00 | $3,000.00 |
10,000 |
$29,000.00 | $1,000.00 | $30,000.00 |
100,000 |
$290,000.00 | $10,000.00 | $300,000.00 |
The change makes it so every 10,000 transactions, you can afford another three machines.
There are numerous ways to market your ATM business including:
Nothing hurts the income of a small business like getting hit with a hefty tax bill for failing to pay your taxes. You especially don’t want to fall behind, given the IRS is charging $450 for failure to file, plus you’ll owe the full tax amount and 4% to 9% interest for failure to pay.
ATM means automated teller machine. An automated teller machine may dispense cash, manage money transfers, accept checks, buy and sell Bitcoin, and facilitate other financial transactions that make accessing funds more convenient for customers.
Next, we answer “How much does an ATM cost?”
ATMs cost between $1,900 and $29,000 depending on the style of ATM, functionality, and security. Some common pricing for ATM machines include:
• New ATMs: $2,700 to $17,000 with an average cost of $6,250
• Used and refurbished ATMs: $1,900+ (or around 80% of the cost of a new machine)
• New wall-mounted ATMs: $6,800 to $12,500
• High-end ATMs: $29,000+
You’ll also have operational costs like cash replacement, data connection, electricity, and receipt paper.
Yes, but you can use a home office and the costs will help pay for your mortgage or rent.
When you’re looking for ATM machines for sale, one option is to buy ATM businesses. You’ll want to:
Starting an ATM business can be a highly profitable venture. It’s similar to starting a vending machine business that provides money to customers. Check out our extensive resources on vending to see how you can apply them as you learn how to start ATM business operations.
Have you seen unique ATM strategies? Share them in the comments.
Did you know that 69 million vehicles need to be towed each year?
That’s nearly 190K people who call up a towing business every day.
We talked to Vanice and Vincent Serrano, founders of ASAP Towing, to find out how to start a tow truck business that makes more than $10M each year. They provide insights on how towing services make money, how to hire employees, how to become a tow truck driver, and more.
[su_note note_color="#dbeafc"] We’ll share insights, strategies, and tips. Click on one of the links below to learn more about starting a tow truck business, or just continue reading.
Vincent grew up working in auto repair shops owned by his dad, but he wanted to have a business to call his own. They already owned a tow truck and had land, so they decided to start a new tow truck company.
The business venture was mostly Vanice and one employee during its first year. About 18 months in, Vincent had to quit his day job and work at ASAP full time because it was making $250K per year.
The local tow truck company offers towing services for breakdowns, lockouts, accidents, impounds, and more. Check out our interview with Vincent and Vanice below.
Before we discuss how to start a towing company, it’s important to learn all about towing and how the industry operates. We’ll discuss:
Vincent told us starting your own towing company requires around $10,000 to get a truck, licenses, and towing equipment. We’ll discuss individual costs more in other sections.
As of January 26, 2024, the average salary for a U.S.-based tow truck driver is $44,198, with a range of $38,820–$50,211, and an average hourly rate of $18.54.
You’ll normally want to pay yourself this salary in addition to some profits from the business when you are an owner-operator.
Your location, experience, employer, skills, and education may impact the pay for tow truck driver jobs. Some drivers will also get bonuses and tips.
According to Indeed, the tow truck driver salary is highest in the following cities:
Transportation businesses normally make 30.59% gross margins and 5.91% net margins. Some people who own towing companies make up to 33.65% profit, which means that the Serranos are likely bringing in somewhere between $700K and $4 million in profits.
Because many tow truck businesses are privately held companies, it is difficult to find accurate revenue numbers for the largest towing businesses. Along with ASAP Towing, some other large tow truck businesses include:
IBIS World values the U.S. towing industry at $12.5B and expects it to grow around 2.9% in 2024. They expect it to continue growing at a faster rate after inflation settles down.
Any industry that exceeds the GDP growth in the U.S. is a great one to enter as a business owner.
Before starting a tow truck company, you will need various tools, permits, and licenses. Consult your local small business office, the DMV, or a lawyer who specializes in tow truck businesses.
A tow trucking company will normally need:
To drive a truck with below a 26,000-pound towing capacity, you only need a regular driver’s license. You’ll need a commercial driver’s license (CDL) for anything bigger.
That means you’ll need to take a CDL course, which takes about a month. Then you’ll need to pass the DMV test.
Next, we’ll look at how to start a tow truck business.
Starting a tow truck business requires special considerations because of the nature of dealing with vehicular accidents and repossessions. You’ll want to follow the process below to start a successful towing business:
1. Identify your target market.
2. Research local regulations.
3. Create a business plan.
4. Consider a startup loan.
5. Register your business.
6. Get the required licenses and permits.
7. Buy equipment and tools.
8. Develop a marketing strategy.
9. Get liability insurance.
10. Open a business bank account.
11. Provide excellent customer service.
Keep reading to learn how to start a towing business.
Tow truck companies use multiple business strategies to bring in revenue. An indispensable strategy is identifying your target market. Potential customers include:
Every towing business needs to understand the local, state, and federal laws that the automobile towing industry operates under. Make sure to check the regulations for all levels of government based on the towing services you provide.
A tow truck operator will normally be governed by federal law in two scenarios:
States and local governments will often have laws and regulations that govern the tow truck industry, including minimum tow truck insurance and CDL requirements.
You don’t have to write a towing business plan, but it won’t hurt. It will help you keep track of how your towing company is progressing toward its goals. Tow truck business plans should follow a process similar to this:
Download our business plan template, then check out our interview with Mike Andes on how to write a business plan below:
Starting a towing business isn’t cheap. With the cost of a flatbed truck, tow truck insurance, commercial auto insurance, and small business insurance, you can expect to spend $10K to start a towing company. Other sites estimate the tow truck business startup cost can range from $62 to $2M.
The Small Business Administration (SBA) offers free courses on financing options and funding programs. For info on using personal funds to start a business, check out this article from The Hartford.
Registering a tow truck business will require you to:
Having an open bank account for your business is crucial to keeping your personal finances and tow truck business finances separate. If you have a limited liability company or a corporation, you’ll also need it to get business loans and personal liability protection.
If you have a business bank account, you can also get a business credit card and potentially commercial truck financing.
You’ll want a variety of insurance policies when you own tow trucks. You’ll want:
When you own tow truck company assets, you’ll also want various types of business insurance, like general liability, a business owner's policy, and commercial property insurance. Try Simply Business to get quotes from many of the best business insurance companies.
As stated, tow trucks may require you to apply for additional permits and licenses. We suggest anyone who wants to tow vehicles reach out to a local business law attorney to verify that they have complied with all laws and regulations.
One of the major business expenses for a successful towing company is the cost of flatbed trucks for hauling wrecked vehicles. Some of the places you can find the different types of tow trucks include:
You’ll want to focus on marketing when starting a tow truck business. Vincent suggests using the following marketing for tow trucks:
Creating a website helps people get the information they need about the services you offer, how much they cost, and where your business is located.
Some services you might list on your website include:
Tow places should optimize their website for search engines for search engines. For example, adding a Google Map location to their website’s footer can help it show up higher on Google.
Vincent told us he has one company that does his videos, another that does search engine optimization, and a third that does social media. You can find all-encompassing services, as well.
Your business budget should include some expenses for advertising on Google. Vincent told us:
[su_quote]We’re spending a little over $1,000 per month on Google right now.[/su_quote]
Vincent told us that he is fairly new to Instagram, but it is starting to provide some returns. He said he has found success on Facebook.
Like many business owners, Vincent is starting to get into video marketing.
When you start a tow truck business, you can create videos about the common types of calls a tow operator gets. You can also explain how to do things like change a battery, replace a tire, and what to do in an accident—but make sure not to give any legal advice.
Established tow truck companies should spend between 2% and 10% of desired revenue on marketing, depending on whether they are marketing their towing business to businesses or consumers. Business-to-consumer companies normally spend more on marketing.
According to entrepreneur Thomas Minieri, new companies should spend up to 20% of their target revenue on marketing to help them grow faster. You will normally want to spend between 15% and 20% of your budget on advertising costs.
Despite the suggestions, many small business owners spend much less on marketing. For instance, both Kenneth and Vanice spend less than 1% of their revenue on marketing.
Tow companies need to provide great customer service. Whether you’re towing for law enforcement, a business, or people in need of repairs, you should try to be compassionate.
Towing companies often provide emergency roadside assistance, but some partner with other businesses to transport vehicles that are (often unintentionally) parked illegally. When someone gets their car towed, remember they may not have known that their car was parked improperly.
Now that you know how to start a tow truck business, let’s look at some frequently asked questions about the industry.
We’ll start with the question on everyone’s mind:
There are a few different types of trucks:
In most cases, expect to spend $25K or more.
You have to start somewhere. Kenneth suggested the following solutions:
He also told us:
[su_quote]I went looking for a loan so I could buy a tow truck and found out that you can’t get a loan to start a business unless you’ve been in business for two years.
I wound up going into it on a lease, rent to own. The truck sold for $50,000. By the time I’m done paying for the truck, it’ll be $106,000.[/su_quote]
He went on to say:
[su_quote]The benefit of leasing is you can get into a vehicle with a limited amount of money. The downfall of it is, if you don’t find the right leasing company, you’re gonna be paying them to double whatever the original amount was. So do a little diligence and find out. If they say there’s no puny penalty for prepayment, make sure that the amount is going to be adjusted.[/su_quote]
There are more ways to fund a towing company.
Common funding paths include:
The SBA offers free courses on financing options and funding programs. For info on using personal funds to start a business, check out this article from The Hartford.
Running the tow truck company is what you will spend most of your time doing. This includes aspects like hiring employees, helping customers, keeping inventory in stock, accounting, and payroll.
Kenneth had a lot to say about hiring drivers. He said the most important aspects of drivers are:
Without the required licensing, they won’t be able to earn money. But the other aspects are more important to focus on for the bigger picture. Here’s what he had to say about communication:
[su_quote][An employee is valuable] when they stay in contact with you and they keep you aware of what’s going on with your vehicle. If they’re having any problems, just tell me what your problem is. And I will give you the answer, ’cause my job is to help you.[/su_quote]
He also emphasized the importance of being mechanically inclined:
[su_quote]I’ve hired three people in the last month. I had to fire one quick because I explained to ’em, you know, the truck needs maintenance. I can’t be driving 16 hours a day and work on my truck, your truck, and everybody else’s truck.
It’s just not gonna happen. You have to take care of the truck. So, if you don’t know how to be a car mechanic, that probably is a tough spot to begin with.
I’m even willing to teach you what you need to know. I don’t have a problem with that because we succeed together as a team or we fail as a team.[/su_quote]
Find out what other people in the industry are doing:
We’ve covered how to start a tow truck company; now it’s your turn to get the licenses and permits, find some customers, get a truck, and start towing.
If you’ve already started one, what has been the most challenging part of starting an independent towing service?
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Jakes story is incredible! It just shows that you dont need MBA nor big capital to start a business. What he has achieved and the business he's built is nothing short of amazing!
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