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The for-profit small businesses you subsequently market yourself would be less likely to consider freebies for a NFP as an open invite to suggest you work for them for free. On the other hand, if you've done their competitor for free and then approach them for fee based work, you'll probably be shown the door rather quickly. Or worse, your freebie work is for someone in another niche whom they can not stand in the least.
I agree with the other suggestion, approach non-profits, they're more used to be offered stuff for free or cheap. If you can't find a nonprofit without a site, find one with a *crappy* site and then re-do it. Then you not only have something for your portfolio, you have a priceless "before-and-after" comparison.
I would recommend a book that would help to boost your web desgn business. It's called " Making Money in Cyberspace: The Inside Information You Need to Start or Take Your Own Business On-Line
by Paul Edwards, Linda Rohrbough, and Sarah Edwards". Good luck!
The nonprofits that post there are already looking for help, so I don't think you'll be offending anyone.
If you can't find a nonprofit without a site, find one with a *crappy* site and then re-do it.
Yeah! Just be sure that the owner of the crappy site isn't the mother of the crappy web designer. It happened to me!
To answer your qustion, having a robust portfolio with a variety of sites is the way to get more business. Doing freebies or cheapies (have I just invented a new word?) for friends and family or a local church or club is a good portfolio boost.