I second everything Flyes said.
I live in a small town where we have an uncontrolled field, one FBO (only for refueling) and only one rental aircraft. Add into the mix five flight instructors who have their business cards on the coutner of the FBO, and you get the dismal picture that I faced.
However, since I moved back here, every student that I have ended up getting was all by word of mouth or referral. Like Flyes said, A LOT of people out there really want to learn to fly, but either they've never really seriously considered it, or they didn't know who to go to to learn. As a matter of fact, I just bought a SUV a couple days ago, and the guy that sold it to me started asking all kinds of questions about getting back into training again, once he found out I was a CFI. He had taken about 15 hours of dual about 5 years ago, and never finished his training. Now he's interested in it, so you never know where the next one might be coming from!
Plus, I have the fortunate distinction that I am the only "full-time" flight instructor on the field, since I fly corporate for a living, and have a decent amount of days off. I've picked up a couple students just because they needed and instructor that could teach them in the day time, or over their lunch hour. Those other instructors that work full time "real" jobs can't accomodate that.
Also, treat your students right, give them a good value for the dollar, be genuinly interested in their learning, and be very flexible, and they'll almost always tell a friend or two who will end up calling you interested in learning.
Become buddy-buddy with the line guys and treat them like your best friends! This will pay dividends on occasions, and even more so, I am the one they typically refer people who call out to the airport or come in looking for a BFR, etc too - even though I don't even have a business card. BUY yourself a set of business cards and pimp those out, BTW.
Some afternoons I would just go out to the airport and hang out in the FBO, conversating with the line guys and watching the airplanes takeoff and land. Don't be out there so much that your an annoyance, but enough that they get to know you, know your flying background, and will be comfortable referring them to you. I once picked up teaching an old man how to fly his new Cessna 310 one day by just sitting out there when he wandered onto the field. And on top of that, rub elbows with all the corporate pilots or general aviation pilots that come thru. There's a fine line not to cross, but ask them questions abotu their airplane, how long they been flying, what other aircraft they've flown etc - IF they look like they want to talk. This could be some potential networking down the road - especially if the pilots get into your airport frequently and can get to know you over time.
Become friends with the other Flight Instructors, or atleast be very friendly when you meet them. If they ever have a cancellation, or are too full of students, maybe they'll refer the potential student to you. I had one of the flight instructors go out of his way to shake my hand and introduce himself to me when we first crossed paths. i thought that was very cordial, and nice , and I subsequently refer everyone to him if I can't help them, or if they're looking for a different instructor.
Long story short, do what works for you and your field. This is what I did and it has worked out wonderfully for me. Keeps me pretty busy on my days off, and I've made a lot of great friends in the process.
Good luck!