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Where is our Industry Heading?

I recently made a trip to the Florida Tow Show to gather Intel on a variety of topics that pertain to the towing industry. I was curious to see how tow operators were responding to the industry change, or if they even knew some of the changes that were taking place.

The show appeared to be successful and vendors selling products went home happy. There was a golf tournament with great weather and a chance to make new friends, but let’s look behind the surface of our industry and see what is really going on.

State Regulation:

Several years ago when I owned and operated a business in Texas there were laws passed that had a major effect on the industry. One association wrote a law requiring:

  1. All tow operators be certified
  2. All employees be drug tested
  3. Criminal background checks on employees
  4. Required certain size lettering on trucks
  5. Required signs posted at your storage yard
  6. Surface requirements at the storage had to meet certain standards

There were financial penalties if you did not meet the requirements. These changes cost the tow company thousands of dollars in licensing their company, their employees, and their trucks. Not to mention the thousands of dollars in fines that was issued by the state for not meeting the standards of the law.

Now let’s fast forward seven years and see where we are now. Many companies sold their business or just closed the doors. It’s tough for the tow company to constantly fighting with the state day in and day out over how to operate their business. The association I belong to hire a lobbyist to constantly watch the new laws that are trying to be implemented every session. Not every association can afford a lobbyist so they are stuck with the laws that get passed for our industry.

This just happened in Ohio where legislation passed laws that had a major effect on the industry in Ohio. The association was not aware of the laws and now has to live with the results. This will become the norm when other states start passing legislation effecting our industry.

In Texas the two associations worked together during this legislation period to make sure there would be no surprises with new laws. Unfortunately this is the only time the two associations work together.

Investors Taking Over

It did not take long for outside investors to see the money that could be made in our industry. Outside operators are coming into cities with a suite cases full of money and offering deals that are hard for cities to turn down. They look at our industry and see the expense side;

  1. Owning trucks
  2. Truck Ins.
  3. Fuel for the trucks
  4. Truck Operators

Then they look at the revenue side of the industry:

  1. Vehicle disposal
  2. Vehicle release
  3. The tow fee

The investor takes the expense side of the industry and passes it on to the tow company. Then they take over the storage yard and dispose of the vehicles while contracting with local towers to perform the tow. They pay the tow fee to the tow company and they make their money on vehicle release or disposal.

I know of at least two other outside companies ready to get into this type of business, and I’m sure more will follow when investors see the money. I am working on a solution that will help the tow company save part of their business.

Tow Companies Selling Out

If I had a pocket full of money I could have purchased no less than four tow companies while I was in Florida. It was sad because they were in the business for over 25 years and now they wanted to give it all up. I asked them what the problems were and why they wanted out. Here are a few of the reasons:

  1. The cost for equipment is going up and the tow fee is going down
  2. Technology is taking over, they are now good with computers
  3. Laws and regulations at a local level are impacting their business
  4. Cut-throat competition
  5. It’s not fun anymore

In the April issue of Tow Times an interview was conducted with the president of one of Michigan’s largest tow companies. The company has been around for over 50 years.

The following questions were asked:

What are the problems does our industry face today? Outside investors are going to take over the industry.

What role does the government play in the future? The government is influenced by insurance companies, and insurance companies don’t like tow companies. Need I say more?

What can an owner do now to save their business? Get educated on the business; learn more about the financial side of the business. The owner cannot continue to do what they are doing today and surviving.

What will the industry look like in 10 years? The big guy will buy out the little guy.

This is one person’s opinion. The answers given I think are correct, however I don’t see the little guy going away. I will tell you how to save your business in next month’s article.

Nationwide Regulations

Several years ago I attended a national association meeting and there were discussions about national certifications for our industry. As a person who lived through it in Texas we do not want that to happen. When Texas implemented the driver certification program; the test to be used in Texas was the national association test. When our association asked if we could use their test for our members we were told no. The national association had an exclusive agreement with the other state association that only they could use the national association test. FYI there were over 17,000 tow operators in Texas who paid $125 for the test. That money was going somewhere.

At the meeting in Florida a national association held a meeting to discuss testing nationwide. I was told there were several state associations that were not happy with that meeting. I hate to see where this might go, but my experience tells me that all testing should be done at a state level and if there is money to be made let the state associations make it. State associations should keep an eye on what is trying nationwide and how it will affect their business.

So here is my trip report and there was a lot more details but I didn’t want to use up the entire magazine on this trip. Watch for the solutions to the future in next month’s magazine.

With the economy the way it is all small businesses are struggling to survive. As I travel around the U.S. I talk to towers that get creative and come up with additional ways to generate revenue.