I started when my kids were in preschool. I would bring in cakes for all the different parties they had, as well as the end of the year party, eventually people started ordering from me, so I developed a brochure of what I sold and put prices in it. Word of mouth is the BEST advertising, and it's free!! Have business cards made and give several to family and friends to give out as well. It will just grow from there! Good Luck!! 
I agree about word of mouth, but I highly recommend that you do not pass out business cards unless you are licensed and legal. It is considered advertising and is the fastest way to get yourself busted by the Board of Health.
My first experience in cake decorating was with my own wedding cake 28 years ago. My mom picked up the cake the morning of my wedding and when I saw it I burst into tears. 
It was not what I had ordered. I asked for pastel flowers cascading over the sides on each tier. What I got was green, yellow and blue things that looked like feathers. My mom went out and bought some cake decorating supplies and I added the pastel flowers. As if getting married isn't stressful enough. lol
Since then I did a couple of wedding cakes for friends and lots of birthday cakes for family members. I enjoyed it as a hobby. I had lots of requests from people who attended the parties to do cakes for them, but I wasn't licensed or anything and the other cakes I did were gifts. The way people sue today I was afraid of the liability.
In July, my husband decided to close our POS computer business that we had opened in 1990, so it just seemed a natural step to open my own business. I did a lot of research about the laws and what I needed to do to get my license and started my business Aug 3, 2006.
I did take 2 cake decorating classes so far and read tons of books, and of course CC has been such a great source of information and inspiration!
I don't have a website up yet and the only advertising I have done is business cards, brochures and word of mouth, but I usually have at least 5 jobs lined up on my "TO DO" board. Right now I am trying to build my portfolio, and I love it when my customer tells me to be creative and only tells me the flavor and the size.
I have gotten a lot of referrals from friends and family members. I know a lot of people in the restaurant business and several of them said I can put my brocures in the lobby of their restaurants. (Which I still need to do.)
When I do cakes for people I always give them extra business cards to give to their friends if they want them.
Talk up your business every chance you get and as people find out about it you should be able to stay as busy as you want. I do give out samples of new products that I make and that seems to help too. Good luck with your new business!
Also word of mouth. But must state I only do cakes I want to do. As a hobbyist I can get away with being choosy. All I say is I don't have time or I have plans. It started with friends and family and now i do a lot that are for friends of friends. If you are licensed then you have a lot of avenues to try. Get your business card up t any place that allows you to pin it to a bulletin board. Go to bridal shows, advertise in city magazines and any publication that the public can pick up free if you have the $$ to spend.
I have been sending all of my cakes to work with my hubby and my daughter. The last cake I sent with my daughter produced me my first TWO cake orders!!!
Also, I did the same thing with Valentine Cookie Bouquets and have requests for those for the next cookie bouquet making holiday.
My mother actually taught me how to decorate when I was a teenager...she took the classes and then showed me. I started doing cakes (just for fun) and taking them to dinners at friends houses and to church. My friends and family loved them so when someone would talk about needing a cake they would tell them to call me. Word of mouth...your best advertising...even in business !!
I agree- word-of-mouth is a great way to get the ball rolling! I've been running another home-based business for 5 years, and I'm just starting with cakes (haven't charged for more than ingredients yet). But I've found the same principles apply-
* Tell everyone you know that you now do cakes. And I mean everyone. Send e-mails with photos of your work.
* Give your Friends & Family a "perk" for referrals that actually order cakes. Like a small discount on their next order, or a free "upgrade" of some kind. Ask them to be your sales force!
* Donate cakes to fundraising auctions at local schools, churches, or agencies. People with money see your cake in-person! (Make sure your bus cards or brochures are there, too, if you are "legal.")
* Make cakes for every party you are invited to- make it your gift for the host or person being celebrated. (And take business cards.)
* Make sure you are represented at local festivals, fundraisers, and wedding expos- booth rentals will pay for themselves- just search these postings for great descriptions and ideas!
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I brought in a cake to every pitch in at the office (and it was a building of 300 women, so we had LOTS of pitch-ins! At least one a month!). Each cake was different and eventually folks in the office just started asking me "How much would you charge for.....?"
I also started as a teenager. My grandma and me bought books and taught each other. We were the only decorators in our area at that time... she passed away 15 years ago and I did not want to decorate cakes again until last year my niece asked me to make her wedding cake ( in my pictures)... so much has changed in the 15 years after I stopped decorating cakes(all this was before fondant, FBCT and needing a license)... now I am getting ready to open my own legal shop and treasure the memories of decorating with my grandma. Word of mouth is all I ever had and believe me that was enough to keep me busy.
* Make cakes for every party you are invited to- make it your gift for the host or person being celebrated. (And take business cards.)
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just becareful to be sensitive on this one...i learned my lesson the hard way. sometimes the host wants to be in the spotlight and doesnt need our "perfect pretty" cakes detracting from their hard work. its always a good idea to ask ahead of time, unless its something like a potluck...
most people wont mind but, its always good to stay sensitive to that.
Oh- of course! Thanks for clarifying that melysa!
I offer it ahead of time- most people are delighted to get a free, custom cake that fits their theme and favorite things.
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