I'm a small local business ...
I have TRIED to hire SEO before, but every time I look into it I am not happy with what I run into.I would kill to have someone else take over the SEO for me & gain me clients so I could give them bigger jobs as well...Right now I am paying the 99 a month to do it myself as well as several hours per week.(Hours that I am NOT out gaining clients in person)
Now on to your issue of local vs not so local...
1. It depends on your local economy, here in Oakland it is a very mixed bag but I live quite close to larger markets such as San Francisco I even pull "local" clients from as far as Modesto & Carmel.
2. If your client can understand that people WILL travel to buy from the PERFECT vendor then he/she can pull clients from anywhere...I have had clients literally buy a plane ticket & fly to me to shoot as well as have me fly to them... Your job is to gain that small business a few killer out of state clients show them just how much ROI you can give them.
3. Many special niche markets have VERY loyal clients, who are willing to drive, fly, have products mailed to them...Make sure your clients understand that and once THEY start seeing the money flow more will flow to you...
4. If your clients are in a vacation destination then take advantage of local tourism industry...
Lots of search is not as important as targeted click through conversion search.
I honestly don't care a bit if I get 150 hits a day or 1500, I want clients...
I have in fact increased by web traffic by 100% since Jan and held it at this new level....Guess what...I might have 2x the number of visitors to my site but I don't yet have 2x the number of bookings or 2x the booking rates.