Starting a roadside assistance business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful roadside assistance business.
Importantly, a critical step in starting a roadside assistance business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Roadside Assistance Business:
- Choose the Name for Your Roadside Assistance Business
- Develop Your Roadside Assistance Business Plan
- Choose the Legal Structure for Your Roadside Assistance Business
- Secure Startup Funding for Your Roadside Assistance Business (If Needed)
- Secure a Location for Your Business
- Register Your Roadside Assistance Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Roadside Assistance Business
- Buy or Lease the Right Roadside Assistance Business Equipment
- Develop Your Roadside Assistance Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Roadside Assistance Business
- Open for Business
1. Choose the Name for Your Roadside Assistance Business
The first step to starting a roadside assistance business is to choose your own business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your own roadside assistance business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your own roadside assistance company.
2. Develop Your Roadside Assistance Business Plan
One of the most important steps in starting a roadside assistance business is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your roadside assistance business.
- Company Overview – this section tells the reader about the history of your roadside assistance business and what type of roadside assistance business you operate. For example, are you a tow truck service, tire changing and repair service, jump start service, or a locksmith?
- Industry Analysis – here you will document key information about the roadside assistance industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your roadside assistance business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your roadside assistance business make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Roadside Assistance Business
Next you need to choose a legal structure for your roadside assistance business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the roadside assistance business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a roadside assistance business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a roadside assistance business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a roadside assistance business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your roadside assistance business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Roadside Assistance Business (If Needed)
In developing your roadside assistance business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a roadside assistance business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a roadside assistance business that they believe has high potential for growth.
5. Secure a Location for Your Business
The best way to find a location for your roadside assistance business is to look for areas with significant traffic. You’ll want to be in a place where there are a lot of opportunities to help stranded drivers. Additionally, you’ll want to ensure the area has ample parking or space along the side of the road to safely and efficiently help drivers.
6. Register Your Roadside Assistance Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your roadside assistance business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your roadside assistance business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
Licenses and permits required to start a roadside assistance business vary by state. However, some common licenses and permits needed include a business license and a state-issued permit to operate a roadside assistance service.
10. Get Business Insurance for Your Roadside Assistance Business
There are a few different types of insurance you may need to operate a roadside assistance business.
Some business insurance policies you should consider for your roadside assistance business include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Auto insurance: This type of insurance from major auto insurance companies will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
- Professional liability insurance: This protects your business against claims of professional negligence.
Find an insurance company, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Roadside Assistance Business Equipment
The most important piece of equipment for any roadside assistance business is a tow truck. Other necessary items include cones, warning triangles, a first-aid kit, and a fire extinguisher. You will also need a variety of automotive tools, including jumper cables, a socket set, and a tire jack.
12. Develop Your Roadside Assistance Business Marketing Materials
Marketing materials will be required to attract and retain customers to your roadside service company.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your roadside assistance business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional roadside assistance business website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your roadside assistance business.
13. Purchase and Setup the Software Needed to Run Your Roadside Assistance Business
There are a few software programs you will need to run a roadside assistance business. You will need a customer service program, an accounting program, and a dispatch program. You will also need a GPS system to track your service vehicles.
14. Open for Business
You are now ready to open your roadside assistance business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Roadside Assistance Business FAQs
No, it's not hard to start a roadside assistance business. However, it is important to have a clear business plan and to be able to execute that plan effectively.
You can do a few things to get started in a roadside assistance business with no experience. First, research what it takes to start a business in this industry. Many resources are available online and through your local library or business association. Also, consider attending an entrepreneur workshop or seminar to gain more insight into the process. Additionally, you can network with other business owners in this industry to gain valuable tips and advice.
The most profitable type of roadside assistance business is a towing business. This type of business can make a lot of money because there is consistently significant demand for towing services. There are a lot of accidents and breakdowns that happen, so there is always a need for weight truck towing.
The business startup costs will vary depending on the size and scope of the roadside assistance business. However, basic expenses can range from $500-$5,000, which would include items such as insurance, permits, and marketing materials. The purchase of a tow truck, equipment, and facilities would greatly increase these startup costs.
The ongoing expenses for a roadside assistance business can include marketing, insurance, and employee costs. The business may also need to regularly purchase supplies and equipment. Other ongoing costs can include leasing or renting a facility.
Roadside assistance businesses make money by charging a fee for their roadside assistance services. They typically charge a flat rate, regardless of the distance traveled or the amount of time it takes to resolve the issue. Some businesses also offer memberships, which allow customers to receive roadside assistance for a discounted price.
Yes, roadside assistance is profitable because it's an essential service people need when their cars break down. Most people are happy to pay for the peace of mind of knowing that someone will be there to help them when they need it. Additionally, roadside assistance businesses often have low overhead costs, allowing them to profit even when they don't have many customers. For these reasons, a roadside assistance business can be a reliable and profitable business to own.
There are many reasons roadside assistance businesses fail. One of the most common reasons is because the business does not have a solid business plan. Other reasons include lack of funding, poor customer service, and lack of effective marketing.