Find and secure an adequate location at which to hold the event. Weather permitting, the space should be outdoors so as to cut way down on the mess factor. A mud wrestling event should take place where the noise and frivolity will not draw unwanted attention from annoyed neighbors and authorities.
Get the word out about the event. Fliers should indicate age limits, charitable donation or cover charge, and whether or not there will be alcohol served or allowed at the event. It is also best to allow those interested in competing to show up a bit early to register.
Clear the designated mud pit area of any rocks and debris that might injure participants.
Use a measuring tape and markers to map out the size of the mud pit. Ideally, it should be fairly large and rectangular, much like a regulation wrestling ring would be.
Lay down a large plastic tarp to serve as the protective flooring of the mud pit.
Construct the walls of the pit using large hay bales or stacked sandbags, whatever might be handy. Make the structure about knee-height at least. Once the walls have been constructed, line the walls with tough plastic.
Fill the floor of the pit with loose dirt or soil. Make sure that the dirt used is free of rocks and debris. Begin adding water until the pit has a measure of mud that is at least ankle to shin deep. The consistency should be smooth, but not soupy, and should definitely not be dry and cakey.
Sign in all contestants when they begin showing up to wrestle. Above all, there should be some type of insurance waiver intact that states that the contestants will be wrestling at their own personal risk.
Appoint a master of ceremonies to rally up the spectators and announce the various matches and outcomes. The event is first and foremost about fun. Not many of the spectators really care about who wins and loses, so keep the atmosphere party-like, and you are home free.