I receive calls at the office weekly from towing and recovery company owners struggling to make a living wage. Operating costs keep going up. And so do customer expectations. It's impossible to keep up with both without increasing your prices. Here's how to raise your towing and recovery rates without losing good customers.
In a recent post, I reviewed the top three things tow customers care about: timeliness, attitude and appearance, and cost. It's impossible to knock it out of the park on all three. If you want to focus on excellent quality and service, you can't undercut the fly-by-night guy—and you shouldn't feel you have to. Instead of thinking about low prices, we should focus our efforts on giving good value. Tow customers want their expectations met. They're willing to pay more, as long as they still feel they "got their money's worth."
Calculating your cost per call
It feels very risky to raise our towing rates.
We can all relate to the example of the tower who doesn’t seem to operate under the same morals and ethics that we do. This is the company owner that is running outdated equipment with old school mindsets, cutting costs and passing the "savings" onto customers. Chances are they won't be around for very long. Still, while they are on the road, it's easy to feel like they're our competition—and it's hard to compete with someone that's going out of business.
I'm going to suggest that we focus our attention elsewhere. Rather than setting our rates according to fellow towers who aren't offering the value we do, let's set our rates according to the actual cost of doing business. We need to figure out how much each truck costs to operate so we know how much we need to charge per call. This way we're basing our prices on facts, not the threat of losing business to the other guy.
In order to get a full understanding of your operating costs, you must collect all the monthly and annual expenses for each truck in your fleet. After you have collected this information, you must break down the expenses into a format that can then be divided into the service that truck provides.
For example, if the monthly expenses for your light duty car carrier are $12,500, and on average that truck performs 90 calls per month, then you need to divide the calls per month into the cost per month. This will give you the cost per call.
Cost-per-call needs to be calculated regularly so it reflects changes in costs. As fuel, insurance and wage costs increase, this needs to be factored in.
How to raise your towing rates
So how to implement this much-needed price increase?
1. Let them know it's happening, and phase in the increase
You could blindside your customers and just start charging them the new, higher price the next time they require your services. Or, you could choose to handle the price increase in a professional manner by sending all of your contract customers a letter explaining your position.
If you're like most towing company owners, you've been absorbing increases in the cost of doing business without raising your rates for a while, which means you'll need to play catch-up. If, after your cost breakdown, you find that you need to increase your prices by 17%, it may not be beneficial to your company to add this all at once. There is nothing wrong with writing a letter explaining that you have absorbed these increases for some time and need to increase your towing rate in multiple increments. You won't lose customers by increasing your towing rate, if you inform them in a manner they're accustomed to. It's normal for prices to go up—it’s just taken the towing industry far too long to come to that conclusion.
2. Continue to offer excellent value
Your customer, like every purchaser of a product or service across North America, is interested in three main things from you as their provider: excellent quality, top-notch service and a low price. Your customers can only have two out of the three. If your customers want the highest quality with the fastest service, then the price will reflect that. If they want the lowest price with the fastest service, then the quality will reflect that. And if your customers want the highest quality with the lowest price, then the service will reflect that. When my dad shared this lesson with me, he finished with a funny quote from an old wise Chinese man: “Cheap thing no good. Good thing no cheap!”
When you decide to increase your towing rates, explain the quality service that you provide. There are many customers who are looking for both quality and service, fully understanding that it will come with a higher price than other services available. These customers—and they are the "good" ones—are looking for value for money.
Emphasize the quality of your operators and their credentials (if they're WreckMaster certified, they've been trained by the largest towing and recovery training institute in the world). Talk about the calibre of your equipment. Go the extra mile whenever you can by doing the small things that don't cost much but add a lot of value.
3. Go after the customers who are looking for quality and service
Pursue the customers and contracts that are looking for what you offer, not the customers and contracts that want you to cut corners in order to slash prices. And while you're bidding on those contracts, always be professional about your fellow towers. We're in this together. Promote your company's qualities instead of trying to degrade your colleagues.
The reality is this: as an industry, we need to increase our towing rates to a fair level. As a career operator, you have earned the right to take home a fair wage without working 18 hours a day. Never before has our industry shown such professionalism. Now we need to back up our efforts with increasing our bottom line. We’ve earned it!