The Vest Pocket Consultant:

Let’s say that you’re a marketing consultant hungry for new business.

A prospective client calls up and says he’d like to hire you right away, that price is not an issue. But there’s a catch. Because he’s got a blockbuster product but no revenue as yet (that’s where you come in), he can’t afford to pay you your standard retainer of $5,000 a month. Instead, he’ll pay you a 10 percent commission on every sale your marketing campaign brings in–even if you end up making $1 million a year.

Should you say yes? If you’re like most consultants, you’d probably turn that job down. After all, it’s an unknown product from a new company with no track record, so why take the risk? And, even if the product does catch fire, how do you know you’ll ever get paid for those sales you worked so hard to make? Better to take your fee upfront than gamble it on what’s behind the curtain or in the box.

Rev-share deals have always been popular among startup businesses with limited capital (and less popular among the consultants and professional service providers who work with them), but now they’ve become a fact of life–especially on the internet. Amazon.com started one of the internet’s first affiliate programs when it started paying other web sites a bounty for steering customers to its site to buy books. YouTube pays users a small fee every time the video they post is viewed. The more people watch, the more money the user stands to make.

At my former internet marketing company, NetCreations, we realized that we needed to do two things to grow our e-mail marketing business: 1. Build a huge database of opt-in e-mail addresses and 2. Rent out as many opt-in e-mail lists as possible to direct marketers. Unfortunately, we didn’t have a war chest of venture capital to buy site traffic, and we didn’t have a lot of cash flow to pay salespeople. So we built our company on the cheap–by joining forces with high-traffic web sites.

Thanks to our network of B2B and B2C publishers, we were able to post our signup forms on more than 500 high-traffic content sites for free and pay the publishers only when we made a sale. On the sales side, we tapped into an existing network of more than 1,000 list brokers, ad agencies and other resellers who sold our lists to the marketers they represented in return for a 20 percent commission. It was a beautiful, risk-free business model, and everybody made lots of money.

Does this mean you should start sharing revenue with your clients and waive your usual fee?

The key is understanding how much upside you stand to gain vs. how much upfront money you’re prepared to lose. For example, a 6 percent commission on a $3 million waterfront mansion would be a nice payday, whereas 6 percent of a $100 product probably would not (unless you helped ring up thousands of sales).

If you do the math and the rev share that your client is offering you doesn’t add up, it’s important to let him know how much he’d have to offer you to make it worth your while. After all, your client can’t make money unless you do.

Recently, I sat down with a client and the talk turned to valuation.

While my client had raised money at a $7 million valuation before the market crashed last year, she was now talking to investors who wanted to put in money at a $2.5 million valuation–a pretty big haircut for her and her original investors.

Her question: Should she take the money and dilute her equity (and risk alienating the investors who had backed her from the beginning), or should she tell the new investors to take a hike?

It’s a question I’m getting more and more now that the economy has begun to recover and investors have started coming back to the table.

In the past, I probably would have advised a client like this to hang tough and keep looking. After all, that’s what I did back at my internet marketing company, NetCreations, when the Russian debt crisis hit in 1998 and we started getting calls from VCs looking to get in at a rock-bottom valuation. The following year, after growing our sales from $3.4 million to $20.7 million, we went public at a $300 million market cap.

But that was then and this now. And in today’s market, where startup capital is scarce and the economy is still struggling to get back on its feet, early-stage investors are hard to find. That’s why, instead of telling clients to hold their breath until they turn blue, I’m advising them to find a way to take the money that’s a win for both sides.

Case in point: I told the client who raised her initial money at the $7 million valuation to consider the size of the investment before making her decision. After all, it’s one thing to give a sweetheart deal to an investor who writes a check for $500,000–it’s another to give the same deal to somebody who’s only willing to put $50,000 in the pot.

I’ve also been advising my early-stage clients to try generating revenue–even a small amount of revenue–to show prospective investors that they’ve got a real business, not just a business plan and a dream. In fact, one of my clients has been so successful making sales that she told me that she may not need to raise any more capital, after all.

Personally, I admire clients like that. Because I know from my own experience in building companies that, if most entrepreneurs spent as much time pitching customers as they do pitching investors, they’d make a lot more money, give up a lot less equity and have a far more valuable company to sell at the end of the day.

Last October, when the global financial crisis brought Wall Street to its knees and it looked like another Great Depression might be around the corner, I urged readers not to panic and posted a 10-point plan for beating the bailout blues.

Today, the Dow is back above 9,000, Goldman Sachs and J.P. Morgan Chase are minting money, and the housing market seems to be stabilizing in many parts of the country.

Unfortunately, the news is still bleak for small-business owners. Bankruptcies and retail store closings are on the rise, and small businesses are cutting back on employees and overhead in a struggle to survive. And despite the government’s efforts to encourage banks to loan money to small-business borrowers, lenders are still leery of extending credit to startups and early-stage companies that fail even in the best of times.

That’s why the advice I gave last fall–”Don’t cut your prices!”–is starting to sound about as compassionate as “Let them eat cake!” Because, even though price-cutting rarely moves the needle (unless your name is Wal-Mart or Amazon), crushes your already slim profit margins and teaches customers to expect the same low, low prices once the economy rebounds, it’s hard to sit there and do nothing while your competition lures your customers away with 50 percent-off sales.

What’s the solution? If you really feel you have no choice but to cut prices, do it strategically. It’s one thing to offer a discount to existing customers to give them an incentive to come back and spend more money; it’s quite another to offer the deal of the century to prospects who’ve never spent a dollar with your company and may never do so. Even if you decide to offer a freebie or “loss leader” to bring new business in the door, make sure to offer it only to qualified prospects whom you believe will become profitable customers down the road.

The bottom line: Never cut prices in a way that makes your business look desperate. There’s nothing more pathetic than a restaurant with an “all you can eat” sign in the window and not a single diner seated inside.

In business, as in life, appearances have a way of becoming reality. Stay strong, give your best customers a reason to stick around, and your company will live to fight another day.

As an entrepreneur and investor, I’ve always been a contrarian–the kind of person who veers left when everybody else is going right.

That’s why I’ve got to hand it to Jonah Staw, co-founder and CEO of LittleMissMatched, a fast-growing consumer startup that sells mismatched socks, pajamas, flip flops, furniture and other bits of brightly colored fun. The company’s motto: “Nothing matches, but anything goes.”

With joblessness nearing 9 percent and shoppers cutting back on everything but bargains and necessities, you’d think that a company that peddles colorful socks would be struggling to keep the lights on.

But you’d be wrong.

With the backing of Catterton Partners, the $2 billion private equity powerhouse behind top-selling consumer brands such as Build-a-Bear, Frederick Fekkai and PF Chang’s Chinese Bistro, LittleMissMatched is about to open its flagship retail store in New York’s Grand Central Terminal, a tourist and transportation hub that attracts more than 30 million people a year. Two more stores are set to open within the next few weeks. And that’s on top of the 85 stores-within-a-store that the company has rolled out in Macy’s department stores across the country. LittleMissMatched products are also available on the web and through 3,000 retail outlets nationwide, including FAO Schwartz, Bed, Bath & Beyond and J.C. Penney.

“The world is incredibly depressed right now, and we are providing people with a little piece of happiness,” Staw says about his company’s decision to move forward despite the recession. “And from a retail perspective, the world’s best real estate is available to us now.

So while large, debt-ridden retailers are going Chapter 11, LittleMissMatched–with the $17.3 million in capital commitments it raised in June 2008–is going shopping. “Every day, I get at least five calls from landlords offering me great deals,” Staw says. “We’re not interested in the cheapest locations. We’re concentrating on the places where we can get the best exposure.”

Staw, 33, an innovation expert and former marketing executive, can afford to be choosy. Launched in 2004 with money from friends, family and angel investors, LittleMissMatched rang up $32 million in retail sales last year, up from $25 million in 2007. Staw predicts “substantial growth” this year as well.

What’s the lesson for other entrepreneurs? First, raise money while you can. It may not be available later. “We made a decision last year to build the business and not worry about funding,” Staw says. Second, when a great location opens up, grab it–even if the landlord’s asking $250 a square foot. Once the economy rebounds, there won’t be too many vacancies in places like Grand Central.

Third, chart your own destiny. Partner with the big boys, but follow your own path.

“There’s not a day that goes by that I don’t wear mismatched socks,” says Staw, who’s getting married May 24 to a woman he believes is his perfect match. And, yes, “we share a sock drawer.”

Now that the new and improved employment numbers have hit the street, there’s been lots of buzz about the economy turning the corner–and soon.

At my consulting firm, Axxess Business Centers, I definitely sense that change is in the air. Not only are new clients coming out of the woodwork for help with their business plans, but existing clients–the companies that hired us before the market tanked–are starting to raise capital from investors who hid their money under their mattresses when the market froze up last fall.

One client of ours, a New York City restaurateur who’s opening an Italian restaurant in Harlem, just closed on $650,000–$400,000 from investors, the rest from a local economic empowerment zone. Now that the hammers are swinging and her space is nearing completion, our client is thinking about raising more capital just in case.

And she’s not the only entrepreneur who’s feeling bullish about her prospects. We just started working with another New York restaurateur to open an American-style bistro and pizzeria across the street from his Italian restaurant in midtown. Turns out the landlord gave him a sweetheart deal on the space. And we’re also helping two contractors from Staten Island who’ve assembled a portfolio of 12 residential properties figure out how to take their real estate business to the next level.

And all this is happening in New York City, epicenter of the financial meltdown.

So here’s what I want to know: Are you feeling more bullish about starting a business these days? Are investors finally opening up their checkbooks to you? Is “risk” no longer a dirty word in your town?

If you, too, think that change is in the air, I want to know!

Even in good times, it’s never easy to get an investor to hand over a check.

But, in times like these, persuading an angel investor to risk even $50,000 on a startup can be like pulling teeth. While the credit markets have begun to thaw and the economy is showing signs of life, shell-shocked investors are taking longer than ever to make up their minds and demanding debt instead of equity in order to cover their downside.

That said, several of our clients here at Axxess have recently succeeded in raising some pretty serious capital. One client just closed a $500,000 round – though it took him six months to do it and he had to pay some hefty interest.

That’s why my colleague Lawrence Rosenbloom, a corporate and securities lawyer at New York’s Ellenoff Grossman & Schole, believes that entrepreneurs are going to have to seek out new types of financing structures if they want to get their ventures off the ground.

Here are some of the trends that Rosenbloom is seeing in the marketplace:

1. Doubling down. “Given the relative scarcity of new investors, we have seen an increase in insiders loaning funds to their firms to bridge the gap to better times and also offering investment opportunities to existing investors through rights offerings,” he says.

2. Debt and Preferred. “Given their seniority in the capital stack, backers of small businesses have been and are expected to continue to invest in debt or preferred stock structures that protect their investments,” he notes. Convertible debt, which pays investors interest and gives them the option of converting their debt to equity when the business takes off, is popular among early-stage companies, too.

3. Strategic Partners. “Sometimes your best financing partner is right in front of your nose — the operational partners that understand the business best and are already ‘investing’ in doing business with you,” Rosenbloom says. “Extending payables or other negotiated financial accommodations can have a material impact on cash flows.”

While I’ve heard clients complain about the tough terms they’ve been getting from investors lately, the truth is that they’re usually happy just to get the money. Let’s face it: It’s a tough market out there. And, as long as the check clears and the cash is green, there’s no sense singing the blues.

You wouldn’t think the life of a small-business consultant would be all that taxing.

But after the week I’ve had, I’m starting to feel like Simon Cowell after taping too many episodes of American Idol.

It started last Wednesday when I moderated the digital media panel at Richie Hecker’s Bootstrapper Summit in Times Square and listened to four startups pitch the panel of VCs and angel investors. (My favorite was the 22-year-old kid from USC with the comparison shopping/cash-back rebate site.) Then it was off to Baltimore on Friday to judge Johns Hopkins‘ 10th annual business plan contest at my alma mater. (The winner was the company that had reinvented the combustion engine and held the patents to prove it.) Then on Sunday, it was back to New York to coach three business plan finalists at NYU Stern School’s annual competition.

What do judges look for in a business plan?

Now that I’ve recovered, I’ll clue you in.

1. A well-crafted executive summary

Most judges are busy people like VCs, executives and entrepreneurs who may not have time to read your business plan ahead of time. That’s why you need a one-page executive summary that shows that your company has what it takes to be a winner.

2. A killer presentation

When it’s your turn to step up to the podium, you’ve got 15 minutes to sell the judges on your deal, so your pitch had better be perfect. “Your presentation is a TV commercial,” Jay Rubin, a marketing communications consultant and a coach at the NYU contest, told the contestants. “Your job is to persuade [the judges] to like you.”

3. Passion

No matter how sleek your PowerPoint presentation or how cool your video, you’ve got to show the judges how passionate you are about your business and its potential for success. Reading the slides just won’t cut it. “You have to be able to look the judges in the eye and say ‘This is what I want,’ ” said Susan Stehlik, a professor in NYU’s management communication program.

4. A realistic assessment of your competition

One of the NYU teams I coached was a clean-tech company marketing a consumer appliance to monitor home electrical use. Trouble was, the company was competing in a crowded space with VC-backed players who were already signing deals with major utilities. My advice? Re-frame the pitch as a David-and-Goliath battle and get the product to market first.

5. Numbers that add up

Judges like business models that scale quickly and profitably, preferably ones with recurring revenue streams and proprietary technology. Another NYU team that I coached wanted to raise $500,000 to roll out a nationwide network of 30 retail locations in 26 markets. Ambitious? Highly. Realistic? Not very.

Too old to enter a business plan contest? Think again! While most university-sponsored contests require you to be a current or former student, most contests also let you partner with someone who is. Not only will you get some valuable feedback from the judges, but you may walk away with a pocketful of cash that you won’t have to pay back.

As they say in the lotto biz, you gotta be in it to win it!

After going to see the movie He’s Just Not That Into You with my daughter not long ago, I couldn’t resist picking up the best-selling relationship guide to get the inside scoop.

Let’s just say that I wolfed down that dating guide faster than a bucket of popcorn at a teen movie. It’s not that I’m looking for dating advice–thanks to my boyfriend, I haven’t had to scramble for a date in almost eight years–it’s just that so much of the advice dished out in the book also applies to selling, an activity that exposes those of us who run our own businesses to rejection and humiliation on an almost-daily basis.

I think we’ve all experienced the frustration of pursuing that elusive client or customer whose lips said “yes, yes” while his checkbook said “no, no.” And who hasn’t felt burned by that client who hired us once and never came back–only to see him a few months later at a networking event chatting it up with the competition? After everything we did to make him happy.

The bottom line: Some clients, for reasons known only to themselves, are just not that into us. And instead of calling them, e-mailing them, inviting them to lunch and making idiots of ourselves, we should accept it and move on.

But hold on, I hear you saying. Sometimes it takes awhile to build a relationship with a prospective customer. After all, if you’ve only met the person at a networking event the night before, you can’t expect him to whip out his checkbook and make a commitment on the spot. Nobody likes a pushy salesperson. You’ve got to play it cool.

OK, that’s fine as far as it goes. But if several weeks have passed (or worse, several months) and that big fish still hasn’t taken the bait, you’re wasting your time if you’re standing around hoping to reel him in. He’s probably still out there in the ocean, swimming along commitment-free.

What’s the solution? Without further ado, I present:

Rosalind’s Five Ways to Tell If Your Prospective Customer or Client Is Just Not That Into You.

1. He’s not returning your calls.

If a prospective client really wants to do business with you, he’ll call you back the same day. Any client who promises to call you back after consulting with his partner, his wife, his cat or his armadillo–and never does–is trying to spare your feelings. Get over it and move on.

2. He hasn’t actually hired you.

Some clients can be pretty sneaky. Under the pretext of doing their homework on you and your company, they’ll spend hours on the phone asking you all sorts of questions, requesting proposals and giving every indication that they’re about to hire you. Don’t be fooled. Until that client actually signs on the dotted line, it’s no more than a midnight booty call.

3. He hasn’t actually paid you.

Many service providers (especially consultants) like to offer a little free advice in the hope the prospective client will hire them once the prospect sees how amazing their work really is. Sometimes this courtship can stretch out for months, even years. Well, guess what? That prospect is not a client until he actually pays you. And if he won’t make a commitment within a reasonable period of time, it’s time to move on to a prospect who will.

4. He still hasn’t broken it off with his old provider.

Who hasn’t gotten a call from a prospective client who’s unhappy with his current law firm, accounting firm, web designer, etc.? I know I’ve heard from plenty of people who’ve had bad experiences with their business plan writer. But if they’re still committed to their current service provider (and still working off the retainer they paid him), there’s nothing in it for you until they decide to break off that relationship and move on.

5. He only wants to see you if you’re picking up the tab.

Mooching off you for free advice is one thing; soaking you for free meals and drinks when you can barely make payroll is unacceptable. If you’re that desperate, go on a date.

I know, I know. It’s tough to give up on a prospective client or customer–especially in today’s economy, but you’ve got to show you mean business if you want to bring business in the door. Otherwise you’re going to waste your time fooling around with prospects who, sad to say, are just not that into you.

If banks won’t lend to small businesses, why should you?

That might seem like an odd question. But lately, I’ve heard from a number of Axxess clients who’ve been burned by clients or customers who spend big but don’t pay their bills. While collections can be a challenge in any economic environment, it’s especially difficult now.

I’m talking about extending trade credit, the practice of delivering a product or service to your customers and giving them 30, 60 or 90 days to pay. Bigger than bank loans, credit lines, equipment leases or any other form of commercial credit, trade credit is the grease that makes the wheels of our economy go ’round.

Back when I was starting NetCreations in the mid-1990s, I remember filling out an application for trade credit from DM News, the bible of the direct-marketing industry, where we had recently started to advertise. Since we were still a home- based business, it wasn’t easy coming up with the names of three vendors who’d extended us credit in the past. In fact, I think I put down our accountant as one of them. But somehow we managed to squeak through.

As our company grew, we began to extend trade credit to our customers as well. Even though we required the customer’s first order to be prepaid (a standard practice in the list-rental business), we typically gave established customers 30 days to pay, even though some of our corporate customers took 60 days or longer. Everything went fine until the dotcom bubble burst, and we were left holding the bag for roughly half a million dollars in bad debt.

How could I have let that happen? Well, even though I’m a financially responsible businessperson who watches my accounts receivable like a hawk, there was no way that we could demand upfront payment from companies that were spending hundreds of thousands of dollars with us–not unless we wanted them defect to our competitors. So even though we reduced the credit limit of some customers whose financial health we thought was questionable, we still ended up getting burned.

What’s the solution? For starters, it’s important to know your customer. It’s one thing to extend trade credit to a Fortune 1000 company (unless its name is General Motors or AIG); it’s another to give credit to a pre-revenue startup or faltering condo developer.

It’s also important to set limits. No matter how big the customer is, it’s always a good idea to require the first order to be prepaid (or, if you’re a professional services provider, to require a retainer). After that, depending on the customer’s size, industry, credit-worthiness and the amount of money the customer plans to spend with you, you’ll want to establish a credit limit–that is, the size of the bill the customer can have outstanding at any given time before he’s got to send you a check.

While I realize it’s not easy to exercise financial discipline at a time like this, you’ve got to bite the bullet and do it. Otherwise, you may find yourself standing at the back of the line along with other unsecured creditors when your customer goes Chapter 7.

There’s also another reason it’s important to draw the line on trade credit. Since commercial banks are hoarding the government’s bailout money for fear of incurring losses on consumer mortgages and small-business loans, many small-business owners are turning to factors and other asset-based lenders for financing. Without receivables that can readily be turned into cash, if your customer has credit problems, they may soon become your own.

So the next time an over-extended customer or client asks for more credit before he’ll buy, ask yourself how you’ll feel 90 days from now when you’re chasing him around town for a check.

In a volatile world where banks collapse, markets crumble and scheming money managers prey on even the most sophisticated investors, it’s reassuring to know that there’s still one financial institution we can believe in.

That’s right. I’m talking about American Express Membership Rewards points. And Starwood Preferred Guest Starpoints, Continental Airlines’ OnePass program and the countless other loyalty rewards programs run by our nation’s hotels, airlines and travel companies. As a frequent flyer who spends many hours on planes and many nights in hotel rooms, it’s nice to know that the companies that I spend money with throughout the year are willing to kick some of that cash back to me to thank me for being a customer.

That’s why, if the government really wants to stem the tide of unemployment and throw small businesses a lifeline, it’s going to have to do more than cut payroll taxes, subsidize COBRA payments and guarantee a higher percentage of SBA loans. It’s got to step up and let consumers know that Uncle Sam is prepared to reward them for every dollar they spend to boost the economy.

I’m suggesting that we blanket the country with gift cards–millions of them, in fact.

Consider these stats:

• More than 60 percent of U.S. households say that loyalty card programs were important in their shopping decisions (A.C. Nielson).

• Consumer spending is 46 percent higher with companies that offer loyalty card programs (Total Research Corp. and Custom Marketing Corp.).

• Fifty-five percent of gift card recipients require more than one trip to the store (Standard Register).

Here’s the best part: Although most gift card recipients spend the full value of their cards within the first month of receiving them (good news for retailers), fewer than 86 percent of gift card holders ever redeem the full value of their cards (good news for the taxpayers), consumer research shows.

Here’s my plan: Give every taxpayer who’s eligible for a 2008 income tax refund a $100 gift card that’s redeemable at any store, restaurant, gas station or small business willing to accept them. We could call them B Cards in honor of the bailout. (Note to Congress: My plan wouldn’t cost the taxpayers a penny. Since the average taxpayer who gets a refund receives close to $3,000, the $100 gift card would be paid out as part of the refund the taxpayer’s getting already.)

Think about it: If the government gave a $100 B Card to each of the roughly 100 million Americans who are likely to get refunds this year, that would inject $10 billion into the U.S. economy, benefiting not only struggling businesses but the cities and states that collect sales tax as well. China, which has half its assets invested in U.S. Treasuries, could stop worrying about the safety of its money and go back to exporting large quantities of low-cost products to the United States. And the stock market would go crazy once those retail sales numbers came out.

If we wanted to stimulate the economy to bounce back even faster, we could make it a use-it-or-lose-it proposition. If you don’t redeem your B Card by Dec. 31, 2009, the card expires and the money goes back to the U.S. Treasury. Retailers could match the B Card with offers of their own–either now or during the holiday shopping season. Taxpayers could also use the B Card to shop online.

What’s the downside? I’m not sure. We may have to tweak a few rules and regulations but, since nothing else has worked so far, I don’t see any reason not to give it a try. There are a lot of smart direct marketers who are out of work right now, many of whom would probably jump at the chance for a steady government job.

Kidding aside, the government needs to get consumers on board before the economy can recover. What better way to win their hearts and wallets than to reward them for the trust they’ve placed in our financial system.

Ordinarily, New York is a seller’s market.

It’s the kind of town where you can’t get a ticket to a show for less than $100, you can’t get a table at a restaurant on Saturday night unless you book a month in advance and, unless you’re willing to pony up the full asking price, you can kiss that penthouse goodbye.

These days, of course, it’s a different story. With Wall Street shedding jobs and bankers’ bonuses being downsized, New York seems to be in the middle of a giant markdown sale. Whether it’s shoes, handbags or condos, there’s no reason to pay retail when you can buy whatever you want for 50 percent to 75 percent off. And, while the city’s bars and restaurants are still packed, you can often get a table if you call the night before.

So what do you do if you’re a seller? Well, it isn’t pretty. Either you sell your condo, art collection or designer dresses at a deep discount or you pull them off the market and hope for a better day.

What if you’re a startup company looking to raise capital? Well, that makes you a seller and the same harsh rules of demand-side economics apply. A couple of weeks ago, I got a call from a friend from my dotcom days. Sales at his e-commerce business were booming, he told me, but the company was running out of cash to finance its rapid growth. And due to the credit crunch, the bank refused to increase the company’s line of credit. His options: Raise capital from a VC at a low valuation or borrow money from a private investor at double-digit interest rates.

From talking to our clients at Axxess, I know he’s not the only entrepreneur who’s found himself between a rock and a hard place.

But even in a market as tough as this one, entrepreneurs do have options–once they learn to conquer their fear. Let’s face it: If you didn’t have something worth selling, investors wouldn’t be interested in talking to you at all. And without you and your product, there wouldn’t be anything for that VC to buy.

Back at NetCreations, we encountered many VCs and investors who viewed us as a vulnerable little company they could get into at a discounted valuation. When the market plunged in 1998 during the Russian debt crisis, one VC offered us $2 million for 20 percent of our company. We told him to take a hike. The following year, the market recovered and, after growing our sales from $3.4 million to $20.7 million, we went public at a $300 million market cap.

Today’s market is different, of course. Even before the stock market tanked, going IPO was no longer an option for most small companies. And because our company was kicking off cash, we had the luxury of saying “no” to vulture capitalists who wanted to take our equity.

But today’s startups have options, too, especially if they’re kicking off cash–or, at the very least, showing that people are using or buying the products or services they’ve created. The rule of “traction” doesn’t apply only to tech companies but to fashion labels, restaurants and consumer products companies as well.

Whatever cards you’re holding, you need to play them for all they’re worth. If the prospective investor sees that he’s the only one you’re talking to, then your negotiating leverage is going to be zero. And if you’re days away from missing payroll, you’re going to have to take pretty much anything that’s put on the table.

Now, I’m not telling you to walk away from the money. You’ve got to do what you’ve got to do to keep your company afloat. I’m just advising you to think strategically about raising capital, reach out to as many investors as you can and present as strong a case as possible that your company has what it takes to be a winner.

Because now is not the time to be holding a “75 percent off” sale.

If Warren Buffett has turned bearish on the economy, is it time for the rest of us to throw in the towel?

Last week, Berkshire Hathaway, the holding company led by the famed investor from Omaha, reported that 2008 was its worst year ever with its net plunging to $4.99 billion from $13.21 billion in 2007. It was only the second negative year suffered by the company since Buffett took over in 1965.

In his annual letter to shareholders, Buffett predicted that the economy “will be in shambles throughout 2009–and, for that matter, probably well beyond.” (To be fair, he also encouraged his shareholders to hang in, noting that “our country has faced far worse travails in the past.”)

Hardly a rosy forecast from the man who invested billions of dollars in Goldman Sachs and General Electric less than a year ago.

But if Buffett’s got the blues, why are America’s entrepreneurs turning bullish?

According to a newly released survey by American Express OPEN, two-thirds of the 600 small business owners polled said they are stressed out about the state of the economy this year, up from 55 percent in February 2008 but down from 71 percent in August. Fewer than half the business owners polled said they’re currently operating at lower profit margins, compared with 56 percent last summer.

“When things first started dropping off, I think there was a panicked reaction to this downturn after so many years of prosperity,” Alice Bredin, a small business advisor to American Express OPEN, told Crain’s New York Business. But now that small business owners have shifted to survival mode, they’re doing better financially than they were last fall.

Better, of course, is a relative term. More than a third of the business owners surveyed said it’s taking longer to collect money from customers, and 75 percent reported they are more risk averse now than they were before the economic crisis. And although the corporate layoffs sweeping the country have dramatically enlarged the available pool of job seekers, only 17 percent of the small business owners said they plan to do any hiring.

And that makes sense. Unlike the slow-moving mammoths of the corporate world, small businesses have always run lean and mean–and that’s why many of us will survive the economic ice age that lies ahead and prosper when things begin to thaw. To me, the survey’s most interesting finding was that, despite the tough times that lie ahead, 80 percent of small business owners said the rewards and opportunities of running their own business outweigh the challenges and risks.

That certainly corresponds with my own experience as an entrepreneur and that of the entrepreneurs whom Richard and I work with here at Axxess. In September, when Lehman Brothers collapsed and the credit markets froze overnight, I felt like a deer in the headlights, paralyzed by flashbacks of the perfect storm that washed away the dotcom market in 2000 and 2001. Today, I’m floating peacefully in a sea of liquidity, shopping for historic West Village townhouses at deeply discounted prices. I’ve also come up with some of the best business ideas I’ve had in years. And while I feel terrible about the thousands of hard-working men and women who are losing their jobs in corporate America, I can’t help feeling optimistic about the many opportunities that lie ahead for me as an entrepreneur.

I don’t think I’m the only one. Over the past few weeks, we’ve started working with several new clients–a startup with an innovative health-care product for kids, a real estate investor with an eye for distressed properties in Queens and not one but two internet portals that want to use the web to bring order to their fragmented industries.

Investors are beginning to come out of the woodwork, too. Last week, I had lunch with three New York-area angels looking for early-stage companies to put money in. Next week, I’m having lunch with a major VC.

When you think about it, this sudden interest in entrepreneurial companies isn’t really that surprising. After all, with the stock market in the tank, the equity vanishing from people’s homes and six-figure corporate jobs hard to come by, there really aren’t too many other places to go.

Which is why the rest of America is now discovering what those of us who work for ourselves have known for years–that, no matter how smart Warren and those other guys may be, your best investment at the end of the day is you.