And you have to be *CONSTANTLY* advertising. That and find a NICHE that you are the local specialist in recording, such as metal bands, punk bands, jazz groups, rap or whatever.
If you are the perceived 'best' place to record a certain genre of music that niche market will allow you to survive and build.
My specialty is indie/alternative/emo bands. I have the musical credibility and knowledge to work this area so the bands trust me, and I have enough recorded output in the genre to establish myself as the 'best' local area to do that in.
One thing I did about 2 years ago is offer to record a good local band that was popular for free. I did their first album and it came off pretty well. Since then I've had success getting the other punk/emo bands in the area to record -- they call me.
Early on BUST YOUR ASS to make your recordings sound as polished as possible. I still routinely spend about 10-20 hours more on a project than I charge the bands to set myself above everyone else in my locality.
I'm in the process of getting established, getting a smaller business loan (40K) to open my doors, and so on and so forth. I got out of the white collar world and now I'm working in another studio doing tracking/mixing sessions.
It's actually a great feeling to, at 33, finally be able to quit my "real" job and bring home the bacon from audio recording. And it was only 2 1/2 years ago I decided to give this a go and see where it would take me.