By Dan Messina For the past two years, I’ve been telling towers how the industry is changing. Social media now plays a big part of our everyday life, our customers have gotten smarter, and they expect a better service, but the biggest change taking place is companies bidding for city contracts. In the past, if you were bidding on contracts:
- Sheriff departments
- Toll ways
- Other municipal contracts
The tower would try and build a relationship with city officials, which were usually someone in law enforcement. It’s not in a tower’s DNA to build relationships with mayors or city council members. A tower would follow a simple procedure, and, if they met the qualifications, they would get in the rotation. Then things started to change. Single tow companies would try and get the entire contract, leaving many towers on the sidelines.
Here are a few examples of things I’ve seen in Texas. In one city, a company did not even have a tow truck and bid. They told the city that if they got the contract they would buy all new trucks. They won the contract and purchased the trucks necessary to provide the towing. There was a sales pitch made along the way that left many towers out of the rotation.
In another city, a group of towers formed a separate company, won the contract and would not leave other towers in because it was a private company…and yet in another city, they would pay the city for the right to tow. They set up requirements so that other towers could not meet them and be left out. Some tow companies were very successful and held these contracts for over 10 years, while many suffered because they did not know how to negotiate with higher city officials. Take a look at what is being done in your city. Do you think it’s fair? Now the bidding process is about to change again.
Outside business people are looking at the towing industry and seeing tremendous opportunities with city contracts. They look at where the expenses are in the towing business. It is usually the tow company that incurs most of the expense:
- Buying trucks
- Providing insurance
- Paying damages
- Paying the drivers
- Paying for the fuel
- Other equipment as needed
While the revenue in towing comes with:
- Vehicle storage
- Letter writing
- Vehicle disposal
- Vehicle parts
Companies are coming into the industry that only want to provide storage and vehicle disposal while contracting local towers to provide the towing. They come in in three-piece suits and a suitcase full of money and start building relationships with city officials. This method is working and they have won contracts in some major cities. As their success grows, other companies will start taking the same approach.
As time goes on, tow companies will have one of three options going forward:
- They can buy a three-piece suit and learn how to build relationships with city officials. This approach will be hard for the average tower because, as I mentioned, it’s just not in their DNA.
- Get together with a group of other towers and bid contracts together. Once again, this will be hard for the average tower who hates his competitor.
- Build a relationship with the company that only wants the storage and vehicle disposal. They will need towers and that’s what you are good at. In many cases, you will be getting city rotation calls you never had before. This will be a new line of revenue you have never had.
For the past few months, I have listened to towers complain about these new companies and how
they will hurt the industry. These new companies are just trying to get into business just like any
other company. They attend tow shows to meet towers who someday might be working for them.
No one ever protested when a big tow company won a contract and eliminated the other towers.
I recently attended a tow show where a new company with a new approach put on a seminar and
tried to explain their approach. They did a terrible job explaining and the attendees showed no
mercy. They talked about what the consumer was being charged and how much the tower was
being paid. The tow ticket exceeded $550 and the tower made $78. The attendees were upset that
the storage company was making over $475 for the call. Here are a few points I would like to
make about that presentation:
- The tower who did the tow was there and he was happy with his fee. He explained
that since he partnered up with this new company, he has gone from 4 trucks to 12
trucks. The people that were not happy were the tow companies that had 12 trucks
and now have 4.
- This was a California tow. Everything in California is expensive and I’m sure the
expenses could be justified.
- These new companies will not win every contract they bid on.
- No tow company reveals their bid information to other competitors, yet questions
were asked on their business philosophy.
- I talked to some towers after the seminar and they want this company in their city.
They wanted on the city rotation for years and could not get on.
- As for consumer protection, they try and get laws passed every session in Texas
because towers are constantly gouging the consumer. Apparently, this is not
About 3 years ago, I was bidding on a city contract with 10 other companies, and this new
company was one of the 10 bidding against me. Yes, they were the only one in suits at the
meeting. They submitted their bid just like I submitted mine. I just looked at them as another tow
company submitting a bid on a contract. The only difference was that, after the meeting, their
first stop was by my location to see if I would be interested in joining them if they won the
contract. No other bidder offered me a partnership. I now increased my chances to be a part of
the contract if I lost the bid. I’m sure they visited several other bidders, as well.
I know this article will not sit well with some towers because you may think I’m defending these
new companies. I’m simple letting towers know that the skyline of our industry is changing.
Protest tow shows if you think that’s the right thing to do, but I assure you that by the end of
2014, there will be at least three other companies with the same approach. If you need help,
www.danmessina.com can be of assistance.
As I was leaving the show, a good friend summed it up when he told me, “Don’t hate the
player, hate the game.”