Starting off with personal contacts is a great way to get started. That way you can encourage advertising via word of mouth with work experience to back it up. I have found that this leads to getting more of the same kind of work, so there is a course you'll need to plot in order to get to your ideal kind of projects.
Many small businesses will have heard of 'user-friendly' design, or will at least be able to quickly grasp it if you start asking them about times they've found a website frustrating. If you follow this conversation with examples of techniques you can use to objectively achieve a user-friendly site, then you'll hopefully have laid a solid foundation for UX work. Take the UX process in your stride though (don't sweat the details) as with small projects it's the momentum and clarity of findings that really make the UX worthwhile, not necessarily the great wall of supporting data.
I'm not quite clear on how you jumped from user-testing to development, but I think you're suggesting that you'll need another person on your team to help bounce test feedback off? That's true, and you'll see the way forward much more clearly, but I would still recommend taking the client along for the ride with you in an active way. Otherwise you'll alienate them from some design decisions and end up having to explain yourself anyway, without them having seen the value first hand. I would get them in whenever you talk with their customers, and once they're familiar with the basic process and the importance of objectivity and an open-mind, you might also get them to have their own conversations with friends/customers/peers. I've found that this works well because they get a feeling of being effective and in-control.
Developers are highly sought after, and designers/founders asking them to work for free has been a running joke for them over the last few years, so I would be very wary of asking for that. There may be a recent graduate looking for part-time work, or someone in a local network who is open to working towards something with you, but in my experience the developers most worth working with are always able to justify charging for their work (the time/cost/quality triangle - pick two). Work on a small project/task first, rather than jumping in with someone you don't know well. You may need to work backwards to some way of being able to charge your clients, or fund things yourself until you can pay yourself back later. You'll also need to have a good idea of what kind of development you need (PHP, Rails, Wordpress, etc) as finding a developer unicorn is as hard as finding a UX unicorn. So, I'd try:
* Putting a notice up at a local coding school or uni campus
* Networking at local web/development meetups
* Asking on Twitter/forums for referrals to good developers
* Lots of people use online freelancer/outsourcing sites to find someone. I have had mixed success with this.
Developers tend to want clear instructions or direction upfront, so as long as you do that they won't necessarily mind if you have little actual experience in UX. Lean on your architectural design experience. If you're lucky you'll also find a someone who is open-minded about re-work and tweaking during usability testing, as long as it doesn't take things in a totally new direction. Get them involved early during research too.
Cheers, and good luck with it. I'd love to keep hearing how you go. =)