The Vest Pocket Consultant:

When clients come to me for advice on raising capital, I always tell them this: It was a helluva lot easier for me to raise $43 million in three weeks when I took my company public than it’s going to be for you to raise the first $200,000 you need to get your business off the ground.

Turns out that Michael Bloomberg has been listening.

Last week, New York’s mayor announced the formation of NYC Seed, a $2 million venture fund for cash-strapped tech entrepreneurs looking to make their dreams a reality. Bloomberg announced the launch of the new fund at the kickoff event for New York’s first-ever Internet Week.

NYC Seed is a public-private joint venture that taps resources from six city agencies and organizations–the New York City Economic Development Corp; the New York City Investment Fund; the economic development arm of the Partnership for New York City; Polytechnic University; the New York State Foundation for Science, Technology and Innovation; and the Industrial and Technology Assistance Corp. The $2 million fund will invest up to $200,000 per company.

“New York City has always been a place where aspiring actors, artists and musicians have come to live out their dreams and ambitions, and we want to make sure it is the place where aspiring technology entrepreneurs come as well,” Bloomberg said.

The fund, which will be headquartered at Polytechnic’s incubator in downtown Brooklyn, will be overseen by an all-star board including Union Square Ventures’ Fred Wilson, Milestone Venture Partners’ Todd Pietri, DFJ Gotham Ventures’ Daniel Schultz and Greycroft’s Drew Lipsher.

Owen Davis, the fund’s managing director, said that NYC Seed will invest in pre-revenue companies founded by tech-savvy people with innovative ideas and a working prototype.

According to the fund’s website, “No idea is too early for consideration for NYC Seed. We fund small teams that want to express their original ideas through software and web-oriented technologies. We encourage first-time founders. There is no set formula for why we invest in a company, but there are some qualities we would like to see. We are looking for a team (2-plus people) with a compelling idea that makes sense today. Your team should be technically savvy, with members [who] possess a proven record of completing complex technology projects.”

The catch: Your company must be based in New York City, or be prepared to move here.

Though the fund’s size may be tiny compared with private venture capital funds such as Union Square Ventures and Greenhill-SAVP that have raised $100 million or more, Maria Gotsch, New York City Investment Fund’s president and chief executive, told Crain’s New York Business, “There is a strong demand for smaller amounts of capital for early-stage companies. NYC Seed will address that demand.”

But is $2 million really enough to jump-start New York’s internet/digital media industry? On Friday, several friends of mine in the internet business weren’t sure. Unlike Silicon Valley, where venture capital seems to flow like water, finding seed capital for New York startups often requires psychic powers and a divining rod. Couldn’t Bloomberg have ponied up a little more cash, they wondered.

As an entrepreneur and consultant, I’d certainly like to see New York put more money in the pot. A fund that invests $200,000 apiece in 10 early-stage companies is going to leave a lot of promising ventures behind–and, unless one of those 10 companies turns out to be the next DoubleClick, 24/7 Media or NetCreations, it won’t do much to create jobs in this town.

As a New York City taxpayer, on the other hand, I share the concerns that were posted on the Crain’s website after the news came out.

“This is [the] twilight zone,” the reader wrote. “Are we in 2000???? Why is taxpayers’ money invested in ventures which have a 1 in 30 chance of succeeding?? Return the taxes to individual taxpayers (shareholders) and let them make their decisions.”

The bottom line: Investing in startup companies is always a crapshoot, but I’m glad to see New York City finally putting some skin in the game. While our motto may be “If You Can Make It Here, You Can Make It Anywhere,” it’s nice to get a little help from our friends.

A couple of weeks ago, I was having lunch with an attorney friend when the conversation turned to the rising cost of fuel and commodities.

Things had gotten so bad, he told me, that a client of his–a landscaper who specializes in installing roof gardens on top of fancy Manhattan apartment buildings–had just started hitting his customers with a surcharge to cover the rising price of copper.

Unfortunately, not every business is in the enviable position of being able to raise prices in order to cover rising costs.

Here are five easy ways you can keep more money in your pocket and put less money in OPEC’s.

1. Open your windows. Less A/C means lower electric bills ,whether you’re working from home or out of an office. There’s no reason to share your hard-earned profits with Con Ed if you don’t have to!

2. Take the subway. Even if you don’t live in New York City like I do, public transportation is a cost-effective option available to people in most parts of the country. Whether you travel by bus, train or carpool with friends, you’ll see an immediate savings–and have a chance to network with potential clients along the way.

3. Save your receipts. However you choose to get from Point A to Point B, remember to save your receipts so you can write off your travel expenses at tax time. Now that New York City taxis have started taking credit cards, you can get American Express Membership Rewards points, too.

4. Order online. Sure, Costco has some great deals on toner cartridges, but how much gas are you going to have to burn to get there? You’ll save more money by ordering online at sites such as Staples, where delivery is free on all orders above $50, excluding custom products like coffee mugs with your company’s logo.

5. Buy in bulk. While you’re ordering online, you might as well buy in bulk. As my mom would say, you’re going to use all those toner cartridges and all that paper anyway–it’s not going to spoil!

I could easily go on. By switching to online banking, you save on postage. By e-mailing instead of faxing, you save on paper. These are all minor cost savings, I know, but a couple of pennies here and there can add up to big dollars down the road.

For all that I love the virtual world, there are some things you’ve just got to do in person.

That’s why, instead of sitting down at my computer on Saturday morning and banging out the rough draft of this newsletter as I usually do, I got on a plane with my daughter, Caroline, and flew to my aunt’s wedding in Minneapolis. (I was the flower girl at her first wedding when I was 7, and I’ve got the pictures to prove it.)

The following 24 hours were a blur of parties, dinners, brunches, shopping, amusement parks (Caroline and I made a pit stop at The Mall of the Americas to hang out with my brothers and their kids before we raced to the hotel to throw on our wedding clothes) and, of course, the ceremony itself. Guests came from as far away as Sweden to celebrate the event.

The next day, Caroline and I got back on the plane (two hours delayed, of course!) and finally arrived at our apartment around 9 p.m. We ordered some takeout, then collapsed, completely exhausted.

I’m sure it would have been more convenient if my aunt had held the ceremony on Second Life and we could have sent our avatars instead. Yet even in a world where stepping in and out of a relationship is as easy as changing your profile settings on Facebook, I’m beginning to sense a craving for something real–the kind of physical community that existed before texting and IM-ing took the place of chatting over a cup of coffee.

Oh, Mom! I hear Caroline saying. You’re such a dinosaur.

Well, maybe I am, but I don’t think I’m the only one.

For example, there’s a new book called In Defense of Food: An Eater’s Manifesto by journalist Michael Pollan, who rails against America’s nutritional industrial complex, which has been poisoning our minds for years with half-baked ideas about what’s good for us. Pollan’s prescription: “Eat food. Not too much. Mostly plants.” It’s No. 56 on Amazon.

Then, last week, The Wall Street Journal ran a story about a 46-year-old billionaire named Nicolas Berggruen who made a fortune in the stock market and is now investing in rice farms in Cambodia, wind farms in Turkey, an ethanol plant in Oregon and skyscrapers in inner cities in poverty-stricken nations. “Now I’m investing in the real world,” he told The Journal. “I’m investing in the ground, in things that will last for generations and improve people’s lives.”

Now, I’ve been in journalism long enough to know that you can’t connect two dots and call it a trend. But I’ve felt the backlash coming for a while. Now that the housing bubble has burst, the dollar has cratered and the price of gas has topped $4 a gallon, a lot of smart people have begun asking themselves whether the boom times and productivity gains of the last 10 years were really just an illusion financed with cheap goods and consumer credit.

As the British architect who sat next to me on the flight to London asked a few months ago when I took my daughters there for spring vacation, “What does America make any more?”

I didn’t really have an answer. The truth is that we Americans, for all our fabled ingenuity, have spent the past decade shuffling assets back and forth and living well beyond our means. And despite the fact that technology has given us more ways to communicate than ever before, we’re more disconnected than ever.

The good news is that skyrocketing oil and commodities prices are now giving us the kick in the butt we’ve been waiting for. Smart money that once went into private equity, real estate and hedge funds in search of easy profits is now pouring into “green” technology and alternative-energy solutions. I’m sure we’ll also figure out a way to grow more food more cost-effectively with less land and fertilizer. The net effect of all this innovation will be to bring up the standard of living worldwide so that, in the future, no single country will gain at the expense of others.

My prescription: Build something. Build it for a reason. Build it with people you enjoy building it with.

When you’ve been a small business consultant as long as I have (six years now and counting), you start to see the world in a very different way.

Back when I was CEO of NetCreations, I often grew impatient with what I saw as the laziness and incompetence of the people around me. After all, if I could leap tall buildings, why couldn’t my employees? Today, I see management problems waiting to be solved and business models in need of an overhaul.

While I’m still not the most patient person in the world, I’ve become a lot more understanding now that I know how business really works. But while I’ve learned to control my temper, I can’t always stop myself from doling out unsolicited management advice to unsuspecting servers and sales clerks. (”I realize it’s only 10 a.m. and your restaurant generally doesn’t get busy until noon, but if you brought in another server between breakfast and lunch, that might bring in some extra business.”)

I also find it difficult not to applaud good management practices when I see small businesses adopting them. Last week, I was finishing breakfast with a local VC at The French Roast (the West Village coffee shop that serves as my office away from the office) when the server came over with the check. But before she put it down on the table, she asked me whether I would mind filling out a card with my name and e-mail address. She seemed embarrassed that her manager had asked her to do this.

“Wow, that’s great!” I told her. “I’ve been coming to The French Roast for years, and finally you’re going to put me in your database. Now you can e-mail me about special offers and promotions any time you want!”

She must have thought I was insane.

The downside to being a business consultant is that sometimes you see problems that aren’t there. Also last week, a contractor who was supposed to begin repainting the ceiling of my apartment on Monday morning didn’t send over his painter to start the job until Wednesday afternoon. Sure, his project manager gave me the usual grab bag of excuses, but I began to suspect that, like so many other contractors I’ve hired in the past, the firm had put my small residential job on the back burner while it finished some big commercial project. After speaking to the painter, I discovered that my hypothesis was wrong, and all was forgiven.

My point is this: After six years of playing family doctor to hundreds of startups and small businesses, I have a hard time getting mad at small companies that drop the ball because it’s so obvious to me what their problems are (I still have zero tolerance for large corporations that screw up my payroll, however).

On the other hand, it’s still frustrating to deal with companies like my old car service from Brooklyn that would promise me a car in five minutes in the middle of a rainstorm when it was clear that the car hadn’t even left the base.

The solution: Honest communication. How much better would our world be if every service provider (doctor, lawyer, plumber and electrician) would simply lay his or her cards face up on the table and tell the truth about what was really going on with his or her business?

Instead of conversations like this:

Homeowner: How soon can you start work on my bathroom?

Contractor: Just give me a deposit and we’ll get started next week.

We’d have conversations like this:

Homeowner: How soon can you start work on my bathroom?

Contractor: Can I get back to you on that? My best guy just called in sick and, because the order from the manufacturer got screwed up, we still haven’t finished the bathroom renovation on the Upper West Side we started three months ago.

Replace contractor with software developer or web design firm, and you get my drift.

Of course, clients don’t always win awards for honesty, either. That’s why contractors and other service providers often must jump through hoops of fire to collect their final payment. It’s a whole lot easier for customers to hold back money for what they claim is shoddy workmanship than it is to come clean and admit that they maxed out their credit card taking their kids on vacation.

That’s why I’ve gone out of my way over the past six years to build a network of reliable contractors and other service providers to help me with the host of business, investment and real estate projects I’ve embarked on since leaving NetCreations. On the rare occasion that a service provider does drop the ball, I try to put my anger on the shelf and give him or her the benefit of the doubt. The last thing I want is to tear somebody’s head off only to find out that he’s in the hospital with his dying mother.

That’s why, when I told Dominick, my appliance repair technician, that I understood that it might take a couple of days before Viking shipped the parts for my dishwasher and a few more days before he could come by to install them, he paid me the ultimate compliment.

“It’s a pleasure,” he said, “to work for somebody who gets it.”

We can scale the heights of Everest, but we still can’t crack the glass ceiling of corporate America.

That was the theme of a widely forwarded article in USA Today last week that was sent to me by my friend Rieva Lesonsky, formerly editor-in- chief of Entrepreneur magazine and now CEO of her own startup company, SMB Connects.

The story asks a question that’s always perplexed me: Where are the Starbucks, Nikes, Amazons, Home Depots and Genentechs founded by women?

Now don’t get me wrong. Few male-owned businesses ever get to the top, either. Most startup businesses fail within their first five years, and more than 90 percent of small businesses that go the distance never get past $1 million a year in sales.

Still, with twice as many women launching businesses as men, you’d think that a growing percentage of businesses started by women entrepreneurs would be breaking into the major leagues by now.

Unfortunately, the statistics tell a different story. According to the article, only 43 women have climbed the ladder to become CEOs of Fortune 1000 companies over the past 35 years. The number of women-founded businesses that have grown into Fortune 1000 companies is even smaller–three, to be exact. And those companies (Golden West Financial, Software Spectrum and PC Connection) were co-founded by men.

So what’s the explanation? Well, it’s tempting to speculate that little saplings don’t grow into billion-dollar oaks overnight, but that doesn’t explain why today’s crop of fast-growing, technology-enabled startups–think Google, Yahoo and Facebook–could not have just as easily been founded by women.

That’s why USA Today asked David Thomson, a former McKinsey & Co. consultant and author of Blueprint to a Billion: 7 Essentials to Achieve Exponential Growth, to re-examine his data and go back and speak to the women entrepreneurs he interviewed for his book.

His discoveries were not encouraging. The odds of an early-stage startup with a big idea eventually hitting $1 billion in annual revenue are 1-in-20,000, he found, which is why in the 22 years from 1985 to 2007, only 387 new publicly traded companies achieved $1 billion in sales. Thomson estimates that the odds of a woman starting a company that reaches $1 billion, whether she stays with the company or leaves, are roughly 1 in 500,000.

So the odds are stacked against us–although that’s not exactly headline news. Back when I was CEO of NetCreations, I was often interviewed for stories about why women-owned businesses tend to start at the kitchen table and stay there. Explanations seemed to fall into two camps–outright discrimination (by banks and investors) and women’s avoidance of risk. Then there’s women’s tendency to start “lifestyle businesses” that make it possible for them to pick up their sick kids from school while their husband commutes to an office.

Based on my experience as an entrepreneur and consultant, I think the two biggest reasons why there are so few large companies founded by women are lack of confidence and lack of financial literacy, which often go hand in hand. Think about it: Many male entrepreneurs–even those with no experience starting a business–are willing to step up to the plate and swing for the fences even if they risk going down in flames. Women, for the most part, tend to be more cautious. I see this with our clients all the time–the guys think they can ring up $40 million in sales in year one while the women doubt they can break $10 million in sales by year five.

But big dreams don’t guarantee big results. Growing a startup company to a billion-dollar business takes capital–and if you can’t communicate your vision to banks and investors, you’re never going to be able to raise the kind of money you need to make it to the Fortune 1000. That’s why I believe that financial literacy is mission critical for anyone who wants to grow his or her business, no matter what gender.

Will women business owners ever scale the heights of the Fortune 1000? I believe one day we will–but not until we learn to speak the language of money.

Last week I spent a lot of time running from one VC conference to another to get a handle on the state of the market for early-stage deals–especially for deals in the New York City area.

The news was decidedly mixed. While fewer VC deals are getting done nationwide, the local market seems to be holding up–at least for now. Last week, Crain’s New York Business reported that New York area technology firms continued to attract venture capital in the first quarter, bucking the national decline. Sixty-six area companies received $526 million in venture funding during the quarter, according to a report released by PricewaterhouseCoopers and the National Venture Capital Association. Funding was up 12 percent from the previous quarter and 35 percent from the same quarter a year ago. While most of the money went to expansion-stage companies ($200 million) and later-stage ventures ($171 million), early-stage ventures landed $121 million, unchanged from the previous period.

Still, the froth seems to have come off pre-money valuations (the price at which companies are valued before the VCs put their money in), peaking in the third quarter of 2007 and slumping in Q4, according to Dow Jones VentureSource and Thomson Financial. Venture-backed liquidity events (that’s VC talk for mergers and IPOs) are also way down this year.

The reason? VCs are trying to get into deals at lower valuations in order to cover their downside if the market slides further and to maximize their upside when the market rebounds. And while every VC would love to back the next MySpace or Facebook, traditional metrics such as ROI and cash flow have reappeared on VCs’ checklists.

So what’s an early-stage company to do? Here’s the scoop according to Ryan Ziegler, investment manager at Edison Venture Group, a New Jersey-based investor in mid-Atlantic information technology companies. Speaking at K&L Gates’ Innovation 2 Exit conference in Newark last Thursday, Ziegler said the key is to be prepared for what the VC is going to ask you and to understand the process that VCs go through in picking their portfolio companies.

Here are some of his pointers:

1. Present your executive summary in no more than a couple of pages. What’s the business problem and how does your company plan to solve it? Present a case study of a specific client implementation, if possible.

2. Map your business plan to the VC’s strategy. Align your plan with an investment thesis the VC believes in. Be flexible and open to the VC’s suggestions.

3. Make the first meeting count. Deliver a concise and compelling presentation (roughly six to 10 slides) in 30 minutes or less. Show the VC that your model is scalable–in other words, that you can grow the business to $30 million-plus in sales and give the investors a fivefold to tenfold return on their money.

4. Keep the dialogue going. Just because one of the VC firm’s partners likes your deal, don’t assume that the rest of the firm is sold on it. Even if you don’t make the cut the first time around, keep the firm updated on your company’s progress. Once you gain traction, the VC may come back to the table.

5. Be realistic about valuation. When the VC finally offers you a term sheet and it’s time to talk turkey, show that you’re a reasonable person the VC can do business with. Don’t get hung up on simplistic valuation formulas or big-dollar deals.

And what does Edison itself look for in the deals it funds? Recurring revenue, high gross margins and a founder who believes that a little dilution today will lead to a far more valuable company in the future.

If GE can’t make a buck, who can?

Last week, General Electric, widely seen by investors as an economic bellwether because of its diverse operations, missed its numbers for the first quarter and signaled trouble ahead for other major U.S. corporations.

But what’s bad for GE may be a blessing in disguise for smaller companies scrambling to keep pace with larger competitors. Last week, I met with a client from the digital printing industry who came to me for help with his business plan. After 9/11, he told me, things were so bad that he ended up putting $1 million of his own money into his company. The good news: Five of his competitors went out of business. Last year, his company posted its best year ever, and now he’s looking for expansion capital.

Now don’t get me wrong. I’m not blind to what’s going on in the marketplace–especially the market for early-stage deals. In 2007, angel investors who specialize in investing in early-stage companies sank $26 billion into startups, according to The Center for Venture Research at the University of New Hampshire. While that’s a pretty impressive number, the figure was flat from the year before, a sharp contrast to the yearly increases that had been piling up since 2003 when the tech community began to bounce back from the dotcom bust. During the first three months of the year, only five VC-backed companies went public on Wall Street, the National Venture Capital Association reported, down from 31 in the fourth quarter of 2007.

But despite professional investors’ hesitance to place bets on companies that may not have an exit any time soon, entrepreneurs who believe in their own businesses are continuing to double down. And companies with great products and experienced management teams are continuing to get funded.

But even if you’re the kind of company that checks all the investors’ boxes, it’s important to maintain a healthy sense of paranoia in times like these. Here are five road-tested strategies to help you weather the the storm:

1. Liquidity: The all-important L-word. Make sure you’ve got enough cash and/or credit to survive a temporary downturn in your business. But don’t put all your eggs in one basket: Credit card companies such as American Express are scaling back credit lines to small businesses, and gun-shy mortgage lenders are freezing home equity lines in areas hardest hit by declines in housing prices.

2. Communication: Don’t hide the facts from your employees, no matter how painful those facts may be. By practicing “open book” management and giving your employees an opportunity to share in your company’s profits when the economy recovers, you’ll give your staff the incentive to work together to cut costs and make smarter decisions.

3. Cash Flow: Now’s the time to increase your cash flow in any way you can. Whether that means cutting costs, deferring trips or raising prices (if you can), boosting cash flow will show your bankers that you’re a rock-solid business whose credit line should be increased, not eliminated.

4. Suppliers: Pay your suppliers on time, every time. The last thing you need is to fall behind on your payments and have your suppliers start billing you COD. If you see your sales slowing, sell some inventory and place a smaller order next time.

5. Margins: Be sure to make a profit on every sale no matter how large or small that sale might be. Now is not the time to sell your products or services at a loss in the hope of landing a more profitable piece of business down the road.

The moral of the story: It takes a small tree to survive a mighty wind. Stay flexible, and you’ll stay in the game.

Keep Your Temper. Nobody Else Wants It.

That’s what it said on the plaque that hung in my grandmother’s kitchen for as long as I can remember. As a hot-headed 10-year-old, it was a constant reminder to take a deep breath and cool my jets no matter what some schoolyard bully or faithless friend had done to me. Today, that plaque sits above the stove in my kitchen in Long Island as a warning to the next generation of entrepreneurs.

Even as an adult, I still have a bad temper–though I usually manage to keep it under control. As a CEO and business owner, I’ve learned the hard way that five minutes of venting at an employee or a vendor can cost you time, money and litigation–no matter how justified you think you may be.

And that’s a tough thing for most entrepreneurs to learn. Because, like me, entrepreneurs are typically A players who are prepared to sacrifice everything for their goals, and to work nights, weekends and holidays to get the job done. So why can’t the people who work for us be that way? Well, because if they were, they wouldn’t be working for us–they’d be running their own companies.

What’s the solution? Well, there are always yoga and medication–though I’m too busy for yoga and too much of a control freak for Prozac. The techniques that work best for me are coping strategies rather than long-term solutions. While they may not make your human resources problems go away, they’ll help you keep your sanity.

For example,

1. Plan B

One thing I’ve learned in business is that nobody’s 100 percent reliable. But if you fire everybody who lets you down, you’ll soon be doing all the work yourself. So whenever somebody I’m counting on messes up or drops the ball, I start making a mental list of whom I can bring in to replace them. Many of these people are already in my database. Plan B, Plan C, Plan D–sure beats counting sheep or popping Xanax.

2. The Talk

Back at NetCreations, when an executive or key employee wasn’t measuring up, I’d take him out to lunch for “the talk.” Instead of confronting the person with a long list of his mistakes and failings, I’d look at him earnestly and ask him in a sweet and sympathetic voice, “Are you happy here at NetCreations? Because you don’t look very happy.” At that point, we both knew it was over. No fuss, no muss, no lawsuits.

3. Play-Doh

When I go to my house in Long Island on Sunday, one of the first things I do is take out my plastic tubs of Crayola Model Magic (a lightweight modeling material that feels like foam when it dries) and sculpt some colorful animals, flowers and planets. It’s great therapy–at least until my cell phone rings with another crisis.

When we build financial models here at Axxess, we calculate to the penny how much our clients will need to spend before their companies turn a profit.

If only our clients were that meticulous about their finances on the personal side. (Did I mention that we are in a recession?)

The truth is that few entrepreneurs–or many other people, for that matter–bother to think about their personal break-even, especially if their entrepreneurial ventures are being bankrolled by their husbands, wives, parents, home-equity credit lines or their friends at Visa, MasterCard and American Express.

And, ultimately, that becomes a problem. Because no matter how passionately you believe in your dream and how much sweat equity you’re prepared to put in before you draw a salary, Con Ed and your landlord want their money now. So while I’m all in favor of debt financing if you’ve got the cash flow to cover it, borrowing money to make your payments is just digging yourself deeper into the hole.

Last week, I sat down with a client of mine (he’s a database consultant by trade) who’s building a billing software application for self-employed professionals. Based on his calculations, he told me, he would have to bill 90 hours of consulting services a month in order to break even on his monthly nut (rent, electric, food, etc.) At this point, he’s billing only 60.

Now don’t get me wrong. While I love the concept of calculating one’s personal break-even, it’s not as if I walk into Bergdorf’s thinking, “That’s a two-consulting-sessions pair of shoes” or “All I need to do is sell one more business plan and I can afford that designer dress.” The truth is that I buy most of my clothes at Ann Taylor and Banana Republic anyway.

What I like about knowing your personal break-even is that it gives you options. One way to boost your cash flow is obvious: Find more clients and bill more hours. You can also raise your hourly rate if your clients allow it. And if Plans A and B don’t work, you can lower your overhead (i.e., move to the suburbs).

Back in 1995, I had a mortgage, a car, two little kids and a startup company called NetCreations that wasn’t making a whole lot of money. It wasn’t until our company celebrated its third anniversary that I was able to completely walk away from the writing, consulting and publishing that I’d been doing to pay the bills and live off my salary as NetCreations’ CEO.

So, while I don’t claim to be Suze Orman, I think the message is clear: When it comes to building a business, you’ve got to do the math–and that means crunching your personal numbers, too.

Back when I was at NetCreations, it used to really burn me to see employees IM-ing each other, checking their personal e-mail and surfing the web for what I assumed were better-paying jobs. In today’s world, I’m sure they’d be checking  Facebook and playing Scrabulous.

Now that I’m older and wiser, however, I’ve come to realize that you can’t expect an employee to walk in the door, sit down at his desk and put his nose to the grindstone for the next 10 hours. We humans are social creatures, and the desire to goof off is hard-wired into our DNA (Which is why I now hire only independent contractors).

But last Sunday, while I was waiting in the Newark airport for a flight that was delayed for three hours, I read an article in The New York Times magazine that changed my point of view.

The article told the story of a website called FreeRice.com, an interactive vocabulary game that donates 20 grains of rice to the United Nations’ World Food Program every time you pick the correct definition of the word flashed on your screen. Each time you get one right, the program raises the bar until you’re stumped trying to guess the definition of a word that means something like sea slug in Bulgarian. Then, just as you think your brain is going to explode, the program lowers the bar and shows you some mercy. For closet intellectuals like me, FreeRice.com is about as unaddictive as heroin.

And I’m not the only one who’s hooked. According to the article, some 300,000 to 500,000 people now play FreeRice.com every day–generally during office hours when they’re supposed to be working. Apparently it’s also popular among college kids who are supposed to be studying.

In its first three months, FreeRice.com has generated $250,000 in donations to the World Food Program, thanks to advertisers such as Regent International Hotels, Alibris books and Shutterfly that pay for the banners that appear every time you click on an answer.

In case you’re wondering, FreeRice.com is not one more “free” Big Brother app from Microsoft or Google on a secret mission to collect behavioral or demographic data. It’s the brainchild of John Breen, a self-employed computer programmer from Bloomington, Ind., who originally designed the game to help his son study for the SAT. A few years ago, he created TheHungerSite.com, which raised about $3 million for the World Food Program. According to the article, Breen makes no money from his project and sends the checks he gets from his advertisers straight to the WFP.

As someone who’s chaired many a fundraising dinner and sat on numerous not-for-profit boards, I think there’s a lot to like about FreeRice.com’s approach to charitable giving. For one, you don’t have to pull teeth or trade favors to get people to go there. For another, both the players and the sponsors know exactly where the money is going. And unlike those fancy dinners and charity balls, you can raise money for a good cause without dressing up in uncomfortable clothes and spending the evening away from your family.

Now, I swear I haven’t been playing FreeRice.com during those hours when I’m supposed to be meeting with clients or drumming up business for Axxess, but I did spend some serious time on the site last Sunday and Monday nights. Let’s just say that a lot of rice got donated in my quest to get to Level 49. (Level 55 is the apparently the highest you can go, and, knowing my own competitive nature, I’m sure I’ll eventually get there, no matter how much rice the site’s advertisers have to donate along the way!)

Free rice, anyone?

Any time the economy drops 63,000 jobs in a month and the Dow slips 10 percent in 10 weeks, I’d say we’re in a recession–whether the president wants to admit it or not.

It’s gotten to the point where I’m almost afraid to look at The Wall Street Journal. If it’s not a front-page story about the biggest wave of foreclosures to hit this country since The Great Depression, it’s $100- a-barrel oil, the credit crisis claiming one more hedge fund or people who stashed their cash in what they thought were super-safe muni bonds who can’t get access to their money.

It’s enough to make you want to stuff your Euros in your mattress and pull the covers over your head.

But there is another side of the story–one I haven’t seen reported in The Journal yet. And that’s the fact that recessions are often good news for small-business owners and self-employed professionals. Because corporate America still needs somebody to keep the lights on and the machines running, big companies often turn to people like us–independent contractors who will work harder, longer and for fewer (if any) benefits–when the going gets tough.

Shortly after I quit my job as a business writer at The Miami Herald in 1990, I set up shop as a home-based freelance writer and began offering my journalism services to business magazines and trade publications.

Then the recession hit.

For me, the timing couldn’t have been better. Rather than pay a full-time staffer $40,000 or $50,000 a year plus benefits, magazines jumped at the chance to hire me for $1,000 a month to write a story–no payroll taxes, benefits or strings attached. Quality journalism for $12,000 a year? That was a no-brainer.

But, while corporate America was getting a great deal, so was I. When I left The Herald, I was making $38,000 a year plus benefits as a full-time reporter. As a freelance writer, I picked up the phone and, within a few years, had assembled a core group of eight to 10 newspaper and magazine clients that each paid me about $1,000 a month. Though I was putting in twice the hours I’d been logging at my full-time newspaper job, I was also making twice the money. While I had to pay my own taxes and find my own health insurance, I was certainly better off than I was before.

Now, I’m not saying that this strategy can work for everyone — especially not sales clerks or factory workers who can’t retail their services on a freelance basis. And I’m really going to be upset if John McCain or any other Republican tries to hold me up as an apologist for big corporations looking to shirk their social responsibilities.

But it never ceases to amaze me in times like these, when I read about people who’ve dipped a toe in entrepreneurial waters when times were flush–such as the Silicon Valley engineers interviewed in a story The Journal ran last week–leaving startup companies for “safe” jobs at big companies with steady pay and benefits. Because these are the same large corporations that wouldn’t think twice about laying off 8 percent of their work force in one day to save their CEO’s seven-figure jobs and wouldn’t know a 10-year employee from a number on a spreadsheet.

Looking back on my five years at The Herald, I don’t think there was a single week when I didn’t hear a rumor of some impending layoff. Fortunately for me, I had already left and gone into the internet business before my old industry got hit by the perfect storm. Some of my friends from the newspaper business have fled to fields such as law, finance and public relations; others are reporters and editors fighting for their jobs.

My point is this: When a recession strikes, there’s no place to hide. And anybody who seriously thinks he or she can flee to the safety of corporate America may very well end up like those thousands of New Orleans residents who got stuck in the Superdome during Hurricane Katrina. In volatile times like these, there’s only one sure-fire strategy to pursue–and that’s to spread your risk among multiple clients and customers.

The big guys call it portfolio theory. I call it small-business survival.

Call me crazy, but one thing I really like about running my own business is writing checks.

Now, don’t get me wrong. Despite all the money I made at NetCreations, I’m still as tight-fisted as any other small business owner I know. But there’s nothing I enjoy more than sitting down on the first day of the month and cutting checks to the people who make my business ventures a success.

Back at NetCreations, we had an affiliate network of hundreds of high-traffic B2B and B2C sites that put up our registration forms and sent e-mail addresses to our database. Our partner sites received 50 percent of the revenue we generated by renting their lists of e-mail addresses to list brokers, ad agencies and direct marketers. Together, we and our partners made a ton of money.

With so much cash pouring in, it might have been tempting to sit on those partner payables until our partners called up and complained. But that wasn’t our policy at NetCreations. Our policy was to pay our partners on the first of each month for all the revenue their lists had generated the month before. So, I’d sit down at my desk with a big stack of checks and start signing. Before the end of the day, those checks were in the mail.

From a cash-management point of view, we may have left some money on the table. After all, we could easily have earned some extra interest on that cash by holding onto it a little longer. But from a partner relations standpoint, it was brilliant. The fact that we not only sent our partners big checks but sent them out on time gave our partners even more incentive to drive traffic to our opt-in e-mail form, creating a win for both of us.

It’s a lesson I’ve taken with me to Axxess, my real estate ventures and every other business I’ve started since then. I know I ask a lot of the people who work with me–whether they’re business plan writers, contractors, accountants or software developers–and when I say jump, I want them to ask, “How high?” You can’t expect people to be there for you nights, weekends and holidays if you owe them money.

So while conventional wisdom tells you to collect your own company’s receivables ASAP but wait as long as possible to pay your bills, I don’t buy it. Back when I was a freelance business writer in the early 1990s, I wrote for a magazine that was always late with its payments. At one point, it owed me more than $7,000–big money for me in those days. Finally, after umpteen collections calls, I quit in disgust and started writing for a competitor. As a business owner, I want to make sure no freelancer ever does that to me.

That’s why the first of the month–Check Signing Day–is a working holiday for me and my partners. Because the more money I make for my partners, the more they make for me.