Towing is a costly business, and getting more so all of the time. Your clients, particularly motor clubs and insurance companies, are very good at keeping their costs as low as possible. They have teams of people focused full-time on paying as little as possible for towing services. That means you need to know your numbers if you want to survive and thrive. Cost per tow and cost per mile are where you need to focus.
So what if you don’t have teams of people to figure out how to win like they do? It‘s OK. You can succeed if you and your team focus on a few key numbers, and make good decisions based upon them. The most important number to understand is your cost per tow. This is pretty simple to understand and stay on top of. Let’s take a look at a mythical tow company, Unicorn Towing, and their cost per tow. The absolute numbers below are not important, but the idea is. Unicorn has to pay the following expenses each month.
Unicorn Towing Monthly Expenses
Rent $5,000.00
Insurance $20,000.00
Utilities $500.00
Phone/IT $800.00
Advertising $1,500.00
Payroll $65,000.00
Fuel $6,000.00
Maintenance. $10,000.00
Loan Payments $20,000.00
Total $128,800.00
If you don’t know how to gather these expenses, for your company, call me and I can help you.
Unicorn typically does about 1200 tows per month, so some quick math tells us that they need at least $107.33 per tow on average just to pay the bills. This is your cost per tow. Of course, they have not paid themselves yet, or put back any money for buying new equipment, upgrades, or other needs. To succeed, their average tow price better be higher than that, by a lot.
What you need to do with this information is work through what you need your target price per tow to be and give that to your dispatchers. They don’t need to know all about the money, but this key piece of information can help you hold them accountable
The other number that they need is your cost per mile. This varies by truck of course but you can get some general numbers by looking at things like fuel and maintenance bills and come up with a heavy, light, and medium-duty number. Again, call me if you would like to learn more.
To tow or Not to Tow
Armed with these two numbers, your dispatchers can make better decisions on calls to take and prioritize. No. That $58 tow will pretty much never make sense unless it is a 20 minute job. You risk missing a better tow. Should I take a truck out of service for 4 hours for that long tow? How much money can I make? Add cost per mile to your tow price target, and you can know.
A good dispatcher can have a huge effect on your bottom line if they are managed to these 2 numbers. Which tows they are picking, and how they are managed, can have a big effect on that price per tow and consequently your profits.
At Towing Forward Company, dispatchers are trained in these methods, and we report to you how we do against them daily. You can set our priorities and we will report back to you how well we do. We can fine-tune our approach to maximize your profits.
Part of our process is to figure out these key numbers and report back to you how we are doing and how we can improve as a team. We will be looking to optimize your return on cost per tow.
Get started with us by just giving us a call at 760-519-2230.
Or get a quote by clicking here.
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