What is the best way to advertise a small business?

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Local networking groups are a great way to market your services and for a little amount of money or sometimes free! Check out http://www.bni.com for a local chapter of BNI (fee based). This is a great way to build relationships with other local businesses and get referrals.

You can also try http://www.etsy.com - it's for handmade/homemade items, but people are selling their design services to other etsy store owners for web graphics, business cards, postcards, etc.

Try connecting with local businesses that require design services but do not have them in-house - ad agencies and print houses are sometimes good places to start. Send them a "gift basket" with a notepad and pen and maybe some candy - people won't throw that stuff out!

Sign up on MerchantCircle.com, LinkedIn.com and Facebook - advertising your shop.

Another great idea is vehicle magnets or direct vinyl lettering - it really does work! If you're driving around town you might as well get paid to do it - and what a great way to show off your design skills!

Best results - Word Of Mouth. Get your past clients to write testimonials and use them on your marketing materials and website. Make sure you send all past clients thank you notes - on the bottom of the note you can let them know you are "never too busy for their referrals".

Here's a fun idea - I used to get pens made and then when I went to restaurants and pay w/ a credit card - I would switch out my pen for the waitresses pen (of course not if it was a nice pen - don't want to be that tacky!!!). That pen will makes it's way around.

If you have a storefront or office space - have an open house and invite potential clients over for snacks and to see what you have to offer.

What I've found is word of mouth and referrals for a service type business is truly the key - no amount of money spent on an ad will equal a good solid referral.