You should definitely read Loko's awesome thread Monetizing on a local niche.
Also, RankSurge posted these helpful tips in another thread here:
A few additional tips to get localized results...Plys, you can get your site listed in Google Maps.
Be sure to have your address listed all on one line as that is how the mapping applications process data.
Be sure to have driving directions to your business from each direction using well known roadways and landmarks
Se sure to list a local phone number
Be sure to get links to your site from regional directories
You might also embed Google Maps into your web site.