It's totally depends of your business.
I think you are correct small business servring locally will not get anything from worldwide traffic. but for local business promotion seo will not be the best keyword rather putting backlinks in relavant pages like those areawise classfied sites and google-map for local business search would work better
Generally small business SEO is done through:
Selection of keywords as well as keyword phrases that is aimed at your target market.
Small business SEO will also work at placing links on other websites that links or redirects back to your site. This is important since the search engines only counts incoming links to your sites in order to improve your search engine rankings.
A whole industry has opened up for small business SEO perhaps because search engines are always changing the way they rank websites and generally how they work.
Local SEO is the next big thing. I say this since I have come across many studies conducted about the local optimization efforts. You might be stunned to know that there are approximately eleven million businesses with Facebook pages. Google has stated that around million pages are being launched every month. Just like social signals, local SEO is growing into a very powerful entity. Even though this might not make much of a difference to the larger brands, this should work for smaller businesses.
If a business is targeting a specific geographical region and if its main source of revenue is local market then it is preferable for that business to focus on local SEO because local SEO is geographical region specific and it targets specific area which is concerned for that business. Local SEO includes all optimization activities which focuses on local area because if you are providing some service in a particular region then you must have to do promotion of your business in that specific region.
If your business only serves locally (and you don't sell online), you MUST focus on local SEO. You must have a Google+ Local page and get customers to leave reviews.
Google's latest update includes a feature that now picks up your location automatically, if you haven't noticed in your search results. So you no longer need to put the city in your keyword like, "dentist in Tampa." If I live in Tampa and just type in "dentist" Google is now smart enough to know that I'm in Tampa and give me a list of local dentists!