Are you planning to start your entrepreneurship journey in 2023? If you are planning to start a roadside assistance business and aren’t sure where to start, you are at the right place. In this blog, we will cover the business model, market analysis and set up process.
What is a roadside assistance business?
A roadside assistance business is a business that helps motorists or automobilists who are stranded on the road due to dysfunctional vehicles. Such assistance may include but not limited to providing fuel, fixing flat tires or ultimately towing the vehicle to a garage if on the spot repairing is impossible. A roadside assistance business generates revenue by providing these services for a fee or providing subscription based services for vehicle owners. There is a huge scope for expansion if you consider covering larger cargo vehicles! If you find this business model complex and overwhelming, do not worry. We’ve got you covered in this blog.
The U.S. has over 43,000 roadside assistance businesses which is a record high in the last 10 years. Revenue of the industry is pegged at $10 billion for 2022 which is 1.3% lower than the previous year. Despite the lower revenue in 2022, the roadside assistance industry is highly likely to witness a better growth in upcoming years as the world economy emerges from the slumber due to the pandemic. Past five years revenue growth in the industry has averaged at 2.6%. The decline in growth is largely attributed to the pandemic induced lockdown.
Recent surge in new vehicle registrations and mileage is a ray of hope for the industry.
- Vehicle owners: Roadside assistance is useful for two wheeler as well as automobile owners in times of inconveniences like flat tires, dead batteries or mechanical failures. Vehicle owners usually prefer subscription based membership though some users who don’t have a membership might need help in case of an emergency.
- Business contracts: Business entities with a large number of commercial vehicles may opt for contract based services from roadside assistance businesses. This is a lucrative opportunity as consistent revenue is ensured for your business. Some businesses who provide first responder services might have requirements of duration based prompt redressal to ensure their vehicles aren’t non operational for extended duration
- Insurance firm contracts: Many insurance companies offering automobile insurance solutions also have roadside assistance as a part of insurance offering. So, you can consider signing contracts with insurance companies to build a high revenue generating client base.
The upfront costs for setting up a roadside assistance business is nominal vis-a-vis other product based businesses.
- Registration and license fee: You need to get your business incorporated and get your business name trademarked. Business license and permit fee may range anywhere from $100-$300. Incorporation will cost an average of $175.
- Office space setup: You can lease affordable office space for as less as $1500 in a tier 2 city. As a roadside assistance business, your office need not be located in a prime location. This gives a breather in overhead expenses compared to other businesses.
- Insurance: It is always a good idea to get your business insured in order to be prepared for unexpected contingencies. Insurance costs an average of $200 depending on the state of your business operation and valuation.
- Tools: You need to stock up a handful of mechanical tools and spare parts like battery pack, floor jack, jumper cables, air pump, screwdrivers, battery analyser, etc. This might cost you an average of $3000 or upwards depending on the extent of geographical area you plan to cater to.
- Tow truck: Tow truck is a must have for starting a roadside assistance business. You can save costs by renting a tow truck for your business.
- Labor costs: You need to hire a few automobile mechanics for running your business. Labor costs are marginally low when compared to other industry segments.
Risk and profit margin
Roadside assistance is a fairly profitable business. As with any other business, it carries its own risks.
Major risk factor is loss incurred due to competition. You should ensure highest caution in choosing your geographical area of operation. As much as possible, plan operating in locations with few or no competitors at all.
Another important factor to consider is huge variation in revenue due to the nature of business. This can be balanced by opting for contract based services with corporate entities and insurance companies which provides steady revenue for your business’ operations.
- Incorporation: First step towards getting your business formally incorporated is to choose an available business name and register it with the Registrar of Companies or equivalent legal authority in your state. You can either choose to complete the process by yourself or avail the services of a Company Secretary or through business registration service provider.
- Operations: Speaking about roadside assistance business, Logistics define the victory. Survival and growth of your business depends on how quickly you respond and cater to your user’s needs. You gain an edge by deploying technology backed processes and tools to manage your business’ service requests and cater them on time. Automation of task flows removes bottlenecks which you are likely to encounter at various stages of operations.
- Marketing: As a newly incorporated small business, it is essential to ensure brand awareness among your potential users. Geo Targeted digital advertising is the go to solution for your marketing needs as it is quick and cost effective compared to traditional methods of marketing.
Encountering challenges is a part of daily life of an entrepreneur. Your perspective of challenges and resolution is what sets you apart from the crowd.
Considering the low overhead costs and ease of labor availability, roadside assistance business is a lucrative option especially for first time entrepreneurs.
We can help you with the technology backed solutions for business operations and marketing automations.
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