Every time I hear this, I am stunned.
My reaction: I just move on.
It's the year 2011. If they cannot, on thier own, see the value (no, NECESSITY) in having a website, then I'm sure I won't be able to convince them of something that is so self-evident.
And, yes, maybe they ARE just doing fine without a website. If so, more power to 'em!
I'm just wondering how you guys handle this situation when it comes up (which is amazingly often!).