The Top 7 Must-Track KPIs for Every Successful Tow Truck Business

As a serial entrepreneur, I cannot overemphasize the importance of tracking Key Performance Indicators (KPIs), especially in the tow truck industry. With the industry projected to grow by 2.2% in 2021 alone, knowing the essential KPIs can help you run a more successful tow truck business. In this article, we will reveal the top seven KPIs you should be tracking, and how to calculate them.

The first KPI every tow truck business owner should be tracking is response time. Ensuring quick response time to customers can significantly impact your business, as studies show that 40% of customers choose a towing service based on faster response times. Other crucial KPIs to monitor include towing volume, which indicates the amount of work your tow truck receives over a given period, and average wait time for assistance, which measures the waiting period for tow services.

• Customer satisfaction: How happy are your customers with the service rendered? Tracking customer satisfaction with surveys and feedback can help improve your business's overall performance.
• Revenue per job: This KPI measures the profitability of each job your tow truck handles. By tracking revenue per job, you can determine which services and customer segments are most valuable to your business.
• Fleet maintenance expenses: Keeping your tow truck fleet up to date and in good condition is essential for long-term business success. Fleet maintenance expenses KPI helps ensure you are managing your fleet efficiently.

Finally, keep track of referral rate from insurance companies/car dealerships, which measures how much of your business comes from referrals. Satisfied customers can have a significant impact on your business growth, and this KPI measures how well you are performing and how loyal your customer base is.

To find out more about how to track and calculate these KPIs, keep reading!

Response Time

As a tow truck company owner, one of your top priorities is ensuring that your customers receive prompt and efficient service. Response time is a key performance indicator (KPI) that measures how quickly your team responds to calls for assistance.

Definition

Response time measures the elapsed time between when a customer first contacts your tow truck company to request assistance and when your team arrives at the scene of the incident.

Use Case

Response time is a critical metric for any tow truck company. A fast response time helps to build customer loyalty, as customers are more likely to return to your company for future service if they feel that their needs were met efficiently and effectively.

How To Calculate KPI

The formula for calculating response time is:

Calculation Example

Suppose a customer contacts your tow truck company at 2:00 PM to request assistance, and your team arrives at the scene of the incident at 2:15 PM. The response time for this job is calculated as:

KPI Advantages

• Helps to ensure prompt and efficient service for customers
• Can improve customer satisfaction and build loyalty
• Allows for continuous improvement of service delivery

KPI Disadvantages

• May be affected by factors outside of the company's control, such as traffic or weather conditions
• May be difficult to track accurately without the use of specialized software

KPI Industry Benchmarks

According to industry benchmarks, the average response time for a tow truck company is approximately 30 minutes. However, many companies strive to achieve response times of 15 minutes or less.

Customer satisfaction

One of the most important KPI metrics for tow truck companies is customer satisfaction. This is because the satisfaction levels of your customers have a direct impact on your revenue. A satisfied customer is more likely to continue using your services and recommend your company to friends and family members. Here is a detailed explanation of the customer satisfaction KPI metric:

Definition

Customer satisfaction refers to the degree to which customers are happy with the service provided by your tow truck company.

Use Case

Measuring customer satisfaction can help you identify areas of your business that need improvement, as well as areas where you are succeeding. Additionally, tracking this KPI regularly can help you improve overall customer loyalty and retention.

How To Calculate KPI

To calculate customer satisfaction, you must first determine the number of customers who have been satisfied with your service. Divide that number by the total number of customers who received service.

Calculation Example

For example, if you served 1,000 customers in a month and 800 of them were satisfied with your service, your customer satisfaction rate would be 80%

KPI Advantages

• All tow truck companies prioritize customer satisfaction as it directly affects the revenue.
• You can gain a competitive advantage by focusing on improving customer satisfaction, since satisfied customers are more likely to return and recommend you to others.

KPI Disadvantages

• There may be difficulty in ensuring the feedback obtained is completely unbiased.
• Measuring the effectiveness of changes to your service can be difficult if you cannot determine cause-and-effect relationships.

KPI Industry Benchmarks

Based on customer survey results, the industry benchmark for customer satisfaction in the towing industry is approximately 85%.

Towing volume

As a towing company, one of your main metrics is your towing volume. But what exactly does that mean? Let's dive in.

Definition

Towing volume measures the total number of vehicles towed in a given period of time. This KPI provides insights into your company's overall performance and can help you identify trends that can inform your strategy.

Use Case

Knowing your towing volume can help you identify changes in the market, measure the impact of marketing efforts, and track fluctuations in demand. It can also be used to forecast future demand and allocate resources effectively.

How To Calculate KPI

To calculate your towing volume KPI, simply add up the total number of vehicles towed in a given period of time. The formula looks like this:

Calculation Example

Let's say that your company towed 1,000 vehicles in the month of April. Your towing volume for April would be:

So your company towed 1,000 vehicles in April.

KPI Advantages

• Provides insights into overall company performance
• Helps identify trends and changes in the market
• Can be used to forecast future demand and allocate resources

KPI Disadvantages

• Does not provide context into why vehicles are being towed
• Does not take into account the size or weight of the vehicles being towed
• May not be the most important KPI for every towing company

KPI Industry Benchmarks

The towing industry does not have standard benchmarks for towing volume. However, you can use your own historical data to create benchmarks for your company.

Revenue per job

One of the most critical KPI metrics for tow truck companies is Revenue per job. Every business is looking to maximize profits, and tow truck companies are no exception. With this KPI, tow truck companies can determine how much revenue per job they are generating.

Definition

Revenue per job is a KPI metric used to measure the average amount of revenue generated on a per job basis. This metric is critical in determining the effectiveness of operations, including marketing and sales efforts, job management strategies, and other efficiency measures in boosting revenue.

Use Case

Consider a tow truck company that has a high number of calls, yet generates a low amount of revenue per job. This scenario indicates that the company might need to change its pricing strategy or improve efficiency in dispatching and completing calls. Alternatively, a tow company may be losing out on opportunities to up-sell and generate revenue in services beyond the tow. The use of this KPI allows a tow truck company to identify areas of weakness and make appropriate adjustments.

How to Calculate KPI

Calculation Example

In this example, a tow truck company generated a total revenue of $2,400 with 120 jobs completed, resulting in a revenue per job of $20.

KPI Advantages

• Measure the average revenue generated per job
• Identify pricing inefficiencies
• Identify profitable services

KPI Disadvantages

• Does not identify a detailed breakdown of revenue per service
• Does not account for other factors affecting revenue such as recurring business

KPI Industry Benchmarks for the KPI: Revenue per job

According to industry benchmarks, the average revenue per job for a tow truck company ranges from $50 to $100, depending on location and region. Keep in mind that inexperienced tow truck companies may have lower benchmark numbers, while established companies with more efficient operations may exceed the benchmark numbers.

Fleet maintenance expenses

Fleet maintenance expenses are a crucial aspect of managing a tow truck business. These expenses include all costs associated with maintaining and repairing your fleet, including labor, parts, and equipment. Keeping track of your fleet maintenance expenses is essential to ensure the smooth operation of your business and maintaining the safety of your drivers.

Definition

Fleet maintenance expenses refer to the total cost of keeping a tow truck fleet operating, including routine maintenance, emergency repairs, and replacement of parts. These expenses play a crucial role in determining the profitability of a tow truck business, as they represent a significant portion of the company's overall operating costs.

Use Case

By tracking fleet maintenance expenses, tow truck businesses can identify potential savings opportunities and reduce the likelihood of costly breakdowns. Additionally, monitoring these expenses can help owners and managers better allocate resources and manage their budgets effectively.

How To Calculate KPI

To calculate the fleet maintenance expenses KPI, simply divide the total amount spent on maintenance by the number of vehicles in the fleet. This formula will give you the average amount of money spent on maintenance per vehicle.

Calculation Example

For example, if a tow truck business spent $100,000 on maintenance over the past year and has ten vehicles in their fleet, the fleet maintenance expenses KPI would be $10,000 per vehicle.

KPI Advantages

• Allows for accurate budgeting and resource allocation
• Enables identification of potential cost-saving opportunities
• Helps reduce the likelihood of costly breakdowns and vehicle downtime

KPI Disadvantages

• May not include unforeseen repair expenses
• Does not account for the age or condition of individual vehicles
• May not reflect seasonal fluctuations in maintenance costs

KPI Industry Benchmarks

According to industry benchmarks, the average fleet maintenance expenses KPI for a tow truck business is around $6,000 to $8,000 per vehicle per year.

Average wait time for assistance

As someone who has owned and operated various businesses, I know how crucial it is to measure the key performance indicators (KPIs) that are essential in tracking the success of your business. One of the most important KPIs in the towing industry is the average wait time for assistance. In this chapter, I will be discussing this KPI in detail, including its definition, use cases, calculation methods, industry benchmarks, and more.

Definition

The average wait time for assistance measures the average amount of time a customer waits for a tow truck to arrive after they have requested assistance. This is a crucial metric in the towing industry because it directly impacts customer satisfaction. The shorter the wait time, the happier the customer, which is vital in building a loyal customer base.

Use Case

Understanding the average wait time for assistance KPI can help tow truck companies optimize their operations and improve customer satisfaction. By measuring this KPI, companies can identify areas where their services are falling short and take steps to rectify them. For instance, if the average wait time is too long, companies can reorganize dispatching routes, hire additional drivers or even subcontract work to third-party vendors.

How To Calculate KPI

The formula for calculating average wait time for assistance is as follows:

For example, let's say your company has served 100 customers over the course of a week. The total wait time for all these customers was 1,000 minutes. To calculate the average wait time for assistance, you would divide the total wait time by the number of customers served

Calculation Example

Here's another example: let's say you track the wait time for your towing company over the course of a month, and the total wait time for all customers served during that month is 10,000 minutes. Divide that by the total number of customers served in the month, which is 1,000, to get the average wait time for assistance.

KPI Advantages

• Measuring average wait time for assistance can help companies improve customer satisfaction by reducing wait times.
• It can help companies identify operational inefficiencies
• It allows for accurate reporting and tracking of performance over time

KPI Disadvantages

• It does not provide insights into why customers are waiting
• It does not account for different towing services offered by companies
• It can be impacted by factors such as geographic location and time of day

KPI Industry Benchmarks for Average Wait Time for Assistance

According to a survey by the Towing and Recovery Association of America, the average wait time for a tow truck to arrive is approximately 20 to 30 minutes. However, this can vary depending on location, demand, and other factors. Ideally, companies should aim to keep wait times as low as possible, and competitive with industry averages.

Referral rate from insurance companies/car dealerships

As a business owner, it’s essential to know your referral rate from insurance companies and car dealerships. This KPI is particularly crucial for towing companies as insurance companies and car dealerships are the main source of business for them.

Definition

Referral rate from insurance companies/car dealerships refers to the number of new customers referred by these businesses to your towing company.

Use Case

Knowing your referral rate helps you understand the effectiveness of your marketing efforts targeted towards these industries. It is also a way to measure the satisfaction of your clients in these industries.

How To Calculate KPI

The formula to calculate this KPI is:

Calculation Example

Suppose your towing company acquires 100 new customers per month and receives 15 new customers referred by insurance companies and car dealerships. Your referral rate would be:

KPI Advantages

• Helps measure the effectiveness of marketing efforts targeted towards insurance companies and car dealerships
• Provides insight into customer satisfaction within these industries
• Helps identify trends and potential areas for improvement

KPI Disadvantages

• Does not account for customers who were referred but did not use the towing company’s services
• Ignores direct marketing efforts not focused towards these industries
• May not provide benchmark data for direct comparison with other towing companies

KPI Industry Benchmarks for the KPI: 'Referral rate from insurance companies/car dealerships'

According to industry data, the average referral rate from insurance companies and car dealerships is between 10-15%. However, it’s essential to create your own benchmarks based on your company's historical data and local market conditions.