This is a gray area between a traditional publishing house and self-publishing. The best small publishing house to find is one in your genre. I know of a couple small publishing houses that only publish religious books. They are set up as large publishers where you pay no upfront fees, they have high editorial standards, they do as much publicity as reasonable within budget and they print runs of books.
If a publisher is asking for upfront fees they are either subsidy publishing or they are a vanity press. If you want to be a best seller, run away from vanity presses. You really want to find a smaller traditional publishing house if you want to make sales but short of a good one, a subsidy publisher might be OK if you ask them the hard questions and they have satisfactory responses.
High Editorial Standards:
This means they don't accept your book then tell you there are editorial problems later. Beware in-house editors of self-publishers, POD publishers and vanity press editors. They have motivation to let many typos and storyline problems slide just to keep moving authors through the printing process. Am I saying that all of those editors poor editors? No. I'm sure those companies find budding talent but they are hampered by the pressure their employers put on them to meet the bottom line.
The proper response should be something along the lines of, "You have a very interesting story idea. Unfortunately, there are many grammatical and storyline problems that need to be addressed before we can consider working with you." They may refer you to some editors and they may not. Their in-house editors should be busy with repeat authors working on another manuscript.
Think of it this way, how many typos do you find in the Harry Potter series? Until your manuscript is that clean, your book should not go to press. I said in another post, "Edit, Edit, Edit!" Don't take the company's word you have a clean script. Hand it around and make sure!
Now we are touching on my area of expertise. Publicity is FREE advertising in different media venues. This ranges from radio interviews to newspaper and magazine reviews or articles to online reviews to television appearances and book events.
If you found a genuine small publisher, they are going to send out press releases to different papers in your area as well as papers that have sections dealing with your topic. Then they FOLLOW UP! I can't tell you the number of times I have heard an author tell me that a publisher sent their press release to the New York Times Book Review and they are waiting for a call back. First of all, if you are a first time author, you have to write something earth shattering for the New York Times Book Review to take notice.
This is where a pristine manuscript makes a difference. If you possibly have a revolutionary new idea that catches the notice of a top reviewing article, they may excuse one typo. They may even be lenient with a second but if you have more than that, they are going to lose interest. Typos make you look like an ameature and you want to be a professional as possible.
Don't waste your time with a company who is going to waste your publicity time. If they ask you for a list of your friends and family to contact, they are wasting your time. You are perfectly capable of telling people you know about your book. The publisher/publicist needs to be spending their time contacting people you don't know. Smaller publishing houses don't have the huge budgets that large houses have so expecting them to fly you to Hawaii for a book signing is unreasonable. They are going to send posters, review copies, bookmarks and press releases.
Printing a run of books:
If you are dealing with an actual small publisher, they are going to print a small run of books because they think they can sell all those books. It saves them money to print that way and they can always print another run if they run out of books.
The major reason you want runs of books printed is because there is usually a lower cover price which means more people will buy your book. POD and vanity presses bump the cover price 2-3 times what competitive books are selling for. They do this because they expect fewer sales and they want to make the author think they're making a lot of money. A typical POD author makes about $1.00 a book. Publishers also need to make it worth their while so they take at least $10.00 of the cover price of the book. A traditionally published author is lucky to make $0.25 per book. It's worth their while because they will sell thousands if not hundreds of thousands of books.