I totally feel your frustration because like you I can't compete
against their prices!
I find that word of mouth and referrals are the best source of work.
It's hard initially to build up enough contacts that could generate
referrals, but it does happen over time. I find that good old
fashioned honest, hard work and dedication create appreciative clients
that will in turn become excellent sources of referrals.
Networking with your peers are a good way also because very often they
are looking for an extra set of hands to help with overflow work. You
could also try signing up with your local Chamber of Commerce and
attend some of their networking functions which is also a good way to
generate more leads.
Hope this helps!
Linda...