I was fortunate in picking up 4 students my first week via word of mouth and have two more waiting until I can fit them in and at least one more referral that I know is being sent my way. They came from different referral sources. Two came from other instructors who were either too far away or too busy for students right now. One was referred to me by an FAA inspector. One was a friend who had been taking lessons with another guy but quit about 9 months ago. The guy who helped me finish up my CFI ticket offered to give me all of his students as he was getting ready to move, but it would be too long a drive to his airport so I passed. Other instructors can be some of your best referrals, help them out and they'll probably help you out.
I've got a web site which I've built up some good localized search engine results for the local airport, flight instruction, etc. and that gets me quite a few leads but just realize a lot of them are poorly qualified or half-interested or requests for illegal charters that I send off to another operator who has a 135 ticket, or weird requests like flying a wedding proposal banner over a metal factory (seriously). But I do think it's important to have a web site as a freelancer. If you think about it whats the first thing you do when you want to find a product or service? Google it. So you need to be there.
Be sure you have a good quality business card on you at all times, let people know you're instructing. You know all that pointless small talk people always make, "Hey how was your weekend?" ( which usually means: I dont care but feel like I need to say something).... answer, "Oh man it was great, I gave a new flight student this intro flight and it was so much fun, we saw ______". Bam! Small talk suddenly became interesting and you just turned the conversation into networking.
As soon as they say "oh that's cool" or "I've always wanted to fly" let them know how easy it is to take an intro flight, and sell the fun of it. If someone casually asks about learning to fly say, "yeah I've got a few slots open for students and I can schedule an intro flight that is a lot of fun and you get to fly the airplane and we fly over X lake and Y scenic spot and we try to find your house. I can usually schedule those intro flights within 24 hours and I do a 1 hour flight for $99 (or whatever your deal is) and you can bring a friend".
Dont say things like "well it will probably take about 6 months and cost you $8,000 assuming you can pass a medical exam"...yuck.
I post lots of flight pictures of my students on Facebook and send them photos via email so they can relive it and share with their friends...you've gotta sell the dream and make it seem simple and accessible... save the gory details until they are hooked, hehe.
Always be networking. If I'm at the gas pump filling up my plane and another local comes in I take 5 minutes to help them haul the ladder and pull the hose and talk flying with them and inevitably they'll say something like "oh sweet I didn't know you instruct here! can I have a card? I've got a couple buddies who've been wanting to start up"... etc. Same thing in the local pilot supply shop, got talking with a guy buying a battery for his float plane, "oh sweet, I know a guy who wants to learn and has access to a plane, he's just been looking for a good instructor..." blah blah blah.... be helpful, friendly, and useful, let people know who you are without seeming to be a slimy salesman.
If you're going to take a local flight yourself, fill the seats...not with the same 3 buddies you always take, instead gather up 2-3 acquaintances for a scenic flight for free, just for fun..."hey I'm taking a fun flight Saturday morning and have a seat open, you want to come?". Take pictures, send them to them, they'll put them on Facebook and tell their friends for a week about their awesome flight you gave them. Give them cards and a web address if you have one and say, "hey I've got a few open slots for flight students, so if you run into anybody who's ever wanted to try it have them give me a call". Don't act like you expect anything from them in return, it's just for fun, and that's the whole idea... but let them know what you do.
Keeping the pipeline filled with prospects is usually not about 1 or 2 strategies, but just repeatedly doing lots of little things to make yourself visible and accessible to people who might be qualified. Make sure you're putting your efforts where they count, no point in networking with a bunch of people who cannot afford to drop thousands of dollars for fun...because that's what this boils down to.
I can also tell you that even before I was instructing I was helping some other guys pick up students for about 1.5 years and they came in waves, one month it'd seem like we had so many leads I could have kept several instructors busy, then there'd be two months without a single lead.... so you just gotta keep up the networking and follow every lead. If you get more coming in than you can handle then share the love and put some other local instructors to work, it will probably come back to you in good ways.