Draft a Budget for Your Mediation Business

By Victoria Pynchon and Joe Kraynak from Success as a Mediator For Dummies

You’ll need to draft a budget for your mediation business. Few businesses have a lower overhead than mediation does. All you really need is a roof over your head, a vehicle to get you from point A to point B, a computer with Internet access, a telephone, and liability insurance.

If you’re planning to start out by moonlighting as a mediator, you may not even need a budget at first. When you’re ready to launch a full-time mediation business, however, a budget is essential in ensuring that you have sufficient cash flow to pay your bills and fuel your business venture.

When drafting your budget, be sure to include all expense categories, including these monthly expenses:

State licensing/registration fees: If you’re licensed in another profession (for example, you’re a psychologist or attorney), you’ll need to budget for state licensing/registration fees if you want to retain your licensure in a profession other than mediation.
Living expenses: Examine your personal finances to find out how much you need to draw from your business monthly to remain solvent. Be sure to include health and life insurance premiums, especially if you’re currently working for an employer who provides coverage.
Office space: If you’re mediating cases in a court-annexed mediation program, you can often use court facilities for free. If not, you may conduct sessions in a home or virtual office. (A virtual office provides a business address, phone number, support personnel, and access to meeting rooms and other facilities. It reduces the overhead of running your own office.)

If you’re mediating business disputes or disputes among professionals, you should feel free to suggest that the mediation take place in their offices.
Professional services: You may want to hire a part-time bookkeeper and a certified public accountant (CPA) to keep records, balance the books, and make sure you fulfill your tax obligations and get all the tax deductions you qualify for. Find out from the bookkeeper and accountant how much to budget for these services.
Internet and communications: List monthly Internet fees and telephone fees (if you have a separate telephone just for your business).
Office supplies: Include paper, ink, file folders, staples, paper clips, and the like. Don’t include one-time costs, such as for office equipment and furniture.
Marketing: The greatest marketing cost for mediators is measured in time and consists of networking face-to-face with the market. In addition to that sweat equity, budget for a website, a blog, business cards, brochures, letterhead, and a monthly newsletter (mail, e-mail, or both). You may also want to include additional funds depending on your marketing plan.
Dues and fees: Dues and fees for membership in organizations to which members of your market belong are also considered marketing expenses. For example, if you belong to the Writers Guild of America to keep in touch with members of that community, include those membership dues in your budget.

Membership in some organizations is free, such as churches, PTAs, community watch groups, and the like. Membership in country clubs, bar associations, and industry groups may be quite costly. Some organizations, such as your local chamber of commerce, rotary group, or Toastmasters club, are mid-range expenses.

Budget enough money to belong to enough organizations that you attend at least one in-person event a month. Because those events are rarely free, add the cost of lunch and dinner meetings you attend during the year. The websites of most industry and bar association groups have calendars of events, the cost of those events, and, of course, the cost of membership.
Liability insurance: Liability insurance is a must for any mediator. Fortunately, the cost is pretty low.
Property insurance: Whether you rent or own office space, purchase property insurance to cover any slips and falls by visitors and damage to or theft of equipment or furniture.

If you rent offices or host mediations in your home office, make sure the premises meet the requirements of state and federal laws regarding the accommodation of people with disabilities. The federal government’s Small Business Administration has an online guide to the ADA. The Equal Opportunity Employment Commission (EEOC) also has a primer on its website advising small businesses how to comply with the ADA.

Individual states also have laws governing access to business premises.
Taxes: Federal and state income taxes are the two biggies. A good rule of thumb is to set aside about 35 percent of your gross income to cover these taxes, but check with your accountant to be sure. Also, most cities levy business taxes on any money-making enterprise, even if it’s only part time or operated out of a home.

These are monthly fees. Also make sure you have enough money set aside to cover one-time start-up costs, including attorney fees (if you choose to incorporate), fees for registering your business with the proper authorities (the secretary of state in most states), and office equipment and furniture expenses for computers and accessories, desks, chairs, bookcases, filing cabinets, staplers, pencil sharpeners, and so on.

Include a prudent reserve of at least three months’ worth of expenses to cover emergencies, such as unexpected vehicle repairs, a lull in business, or a sudden increase in dues, fees, taxes, or insurance premiums.

Keep your business and personal finances separate. Opening a separate checking account for your business and having a business-only credit card are two great ways to track business expenses. In addition, personal finance programs, such as Quicken, enable you to keep separate accounts.