The chances of a Facebook user seeing an advert for a local business when they actually need that service is pretty low, unless they have posted anything about their need.
Having had 40 Million visitors looking for local services to our sites I can tell you, without a great deal of changes to the way Facebook does ads, small businesses are not going to have much success.
The best (current) way for Facebook to match ads to need is through their toolbar collecting info - but the takeup of that has been woefull - people don't like toolbars.
Combining the knowledge between Facebook and Twitter would help both companies monetise their traffic. But what they really need to do is offer a full web search alternative to Google, that's when they should give out the free ads (or maybe this is in preparation for that...)