When it comes to forming a band, it's a networking business all the way! Hang out in clubs, performance venues and recording studios -- every chance you can, all the time. Get out there and make an impression somehow. If you're not playing, dress cool -- do something to draw attention to yourself.
If you see a band and really like one of the musicians, compliment him and introduce yourself. There's nothing a musician likes more than to be told you're into what he’s doing. If you're shy, it's going to be a lot harder for you, unless you're incredibly talented.
Take every gig you can get when you're starting out, no matter how crummy it is. You never really know where you're going to meet the right people -- it can take a long time. There are cases where bands do auditions through ads and they find the right guy out of the blue, but usually it's people you know.
How do you know when they're the "right people?" Musically, you need that indefinable thing called chemistry. When people get together and work or create, there's a chemistry or there isn't. Second, you've just got to get somebody you can get along with. The idea that tension and stress causes great music is only true for a little while!
Economically, you're better off just hiring guys and not having any long-term commitments. But when you say, "You're in the band" -- you know, "You're a Scorcher" or "You're a Rolling Stone" -- they’ll give more, they're willing to do more, they feel more a part of it and they're apt to give a better performance.
It's a tough business, and there are no easy answers, that's for sure. But it boils down to being out there all the time, looking, networking and playing.