I would modify turnkey's suggestion about giving webmasters (I'm guessing that he's referring to "designers") free hosting:
Have the designers pay upfront, just like a regular client. Then, with each paying client they bring you, give them a payout (or credit their account.) This keeps it on an even business footing for both sides, since there is a clear exchange of services: money for hosting, signups for money. Both sides know that neither of you is doing this for charity. You'll get fewer designers who are just playing around - you'll get designers who are serious about getting clients. Or at the very least, they're not going to be playing on your dime.
Word of mouth and personal referrals are a way to go. The market's full of web hosts and other Internet service providers of various types, so you can differentiate yourself in two ways: superior offerings, or superior service. Many of the people who are potential clients (more likely: the ones who don't have sites, or have sites on the freeservers) don't really completely understand hosting, and all that they can / can't do. They probably won't feel comfortable making the jump to paying-hosting-client unless they feel like they know the people behind the site.
There was an article recently (forget where...sorry) about electronics stores like Circuit City who were retraining their sales staff to sell to women: focus on what the product can do for them, rather than what doodads and whizbangs the product has. The market for personal electronics has been plumbed, insofar as the gadgetmeisters. It's the rest of us who want a wide-screen cool as heck plasma TV, but don't know enough about the beasties to buy intelligently - so we don't buy. Either that, or we buy from people who our friends and family have told us, "They'll give you a good deal" or "They're not cheap, but they won't steer you wrong" or even better, "They'll explain things to you, and won't try to upsell if you're firm with them". It's much the same with hosting.
