Sure, niche is good. But if you want to start a new design firm, this is just not very good advice. I would say that 99% of new design firms that succeed go where the work is, not try to convince a bakery they need a 100$ website.
Fair enough. I had it down more as $2000 for the local car dealership, but either way I agree that cold calling small businesses isn't a strategy I've seen successfully exploited either.
I guess it raises the question of how do you "go where the money is" if you're stating out.