Local, Mobile & Social needs to be your mantra.

Your website needs to have the NAP (Name address, phone) in proper schema in the footer of your site. You also need to build citations on sites like yellowpages, yelp, foursquares etc.  Typically 100 local citations will be enough to rank your local business.
The other important factor for ranking a local business is reviews, the more reviews on third party sites is an important google ranking factor this is known as social proof.
You need to be social and carry on conversations with people on the social media platforms G+, Twitter, Facebook and others.
Now with all of the above, make sure your website is mobile friendly as over 50% of all searches are now made from mobile devices.

From a question asked on Quora:  http://www.quora.com/Is-local-SEO-important-for-a-small-local-business-website