Use craigs list or http://www.ebayclassifieds.com/ stuff like that. Also you can use newspaper, fliers, word of mouth. If you want to target a specific city you live in you could probably make a website and get it ranked high on Google's search engine for keywords like "Las Vegas Web Designer" or something along those lines. Whenever I look for a local web designer that's how I find them!
I'm also interested in starting a web design company on the side. I was thinking of using go daddy or another hosting company that offers reseller accounts and if my clients don't have a host setup already I'd suggest they go through my reseller. That way I'd get residual money every month on the back end.