47% of custom software projects fail—not because the idea was bad, but because the wrong development partner was chosen. The average project costs $150,000 and takes 6-12 months. Get it wrong, and you've lost irreplaceable time and money.
Red Flags vs Green Flags
| Area | 🚩 Red Flag | ✅ Green Flag |
|---|---|---|
| Experience | Can't describe relevant experience or past projects | Can articulate similar projects (even without revealing clients) |
| Pricing | 50-70% lower than other bids | Competitive pricing with detailed breakdown |
| Timelines | "We can build your CRM in 6 weeks" | Realistic estimates with contingency built in |
| Team | Vague about who will work on your project | Introduces specific team members by name and experience |
| Communication | Unresponsive during sales process | Defined meeting cadence, response times, escalation paths |
| Proposals | Generic, cookie-cutter proposals | Asks hard questions and challenges assumptions |
| Code Quality | Won't show code samples | Provides code samples or GitHub profiles |
| Security | Doesn't mention security practices | Proactively discusses security best practices |
| Verification | Can't verify experience through any means | Can demonstrate expertise (code samples, technical depth) |
| Post-Launch | No support after deployment | Clear post-launch support and maintenance plans |
Due Diligence Checklist
| Category | What to Evaluate | Why It Matters |
|---|---|---|
| Technical | Verify relevant experience (anonymized examples OK) | Proven experience with your type of project |
| Request code samples or GitHub profiles | Code quality and development practices | |
| Verify technology stack expertise | They've mastered the tools you need | |
| Check security practices and compliance | Protect your users and business | |
| Confirm scalability experience | System can grow with your business | |
| Business | Years in business (minimum 3-5 years) | Stability and won't disappear mid-project |
| Team size and stability | Can handle your project scale | |
| Client retention rate | Clients come back for more work | |
| Industry reputation and reviews | Third-party validation of quality | |
| Cultural Fit | Communication style compatibility | Smooth collaboration and fewer conflicts |
| Values alignment (quality, security, transparency) | Shared priorities lead to better outcomes | |
| Timezone overlap for meetings | Real-time collaboration when needed | |
| Responsiveness during sales process | Preview of working relationship |
Critical Questions to Ask
"Who will actually work on my project?"
❌ Bad: "Our team" (vague)
✅ Good: "Lead developer Sarah (8 years), Backend Mike (5 years), Frontend Lisa (4 years)"
"What happens if timeline slips?"
❌ Bad: "It won't" (unrealistic)
✅ Good: "We build 15-20% buffer. We'll flag delays immediately with options to adjust."
"How do you handle scope changes?"
❌ Bad: "Everything's included" (scope creep nightmare)
✅ Good: "Formal change request process with impact assessment"
"What's included post-launch?"
❌ Bad: "30 days support" then disappear
✅ Good: "90-day warranty, ongoing maintenance packages, training, documentation"
Pricing Evaluation
Price is important, but it's not the only factor. Understanding what drives pricing helps you spot both red flags and fair deals.
Too Cheap = Danger
If a bid is 50%+ below market rates, there's a reason. They're either using inexperienced junior developers, drastically underestimating scope, or planning expensive change orders later. You'll pay the difference—with interest.
Too Expensive ≠ Best
High prices don't automatically guarantee quality. Always question what justifies the premium. Are you paying for expertise and quality, or just overhead and inefficiency?
Right Pricing Indicators
- Within 20% of average bids
- Transparent breakdown
- Clear scope (included/excluded)
- Reasonable contingency (15-20%)
- Fair payment milestones
Contract Must-Haves
- Clear Deliverables: Define what "done" means for each milestone
- IP Ownership: All code/designs are yours upon final payment
- Confidentiality: Comprehensive NDA (3-5 year minimum)
- Payment Milestones: Tied to deliverables, not just time
- Change Order Process: Formal process for scope changes
- Warranty Period: Minimum 90 days post-launch for bug fixes
- Exit Clauses: What happens if you need to terminate early
- SLAs: Response times and availability expectations
The Trial Project Strategy
For major engagements ($200k+), start with a trial project ($20k-$50k, 4-8 weeks).
What You Learn:
- Communication quality
- Technical capability
- Process effectiveness
- Cultural fit
- Reliability on deadlines/budgets
Spending $30k to de-risk a $300k engagement is cheap insurance.
Decision Framework
Tier 1: Deal-Breakers
- Can't demonstrate relevant technical capability
- Major red flags present
- Can't provide code samples or technical validation
- Pricing is suspicious or unjustified
Tier 2: Important Differentiators
- Depth of relevant experience
- Cultural fit and communication
- Process maturity
- Technical depth and expertise demonstration
- Security and quality practices
Tier 3: Nice-to-Have
- Office location
- Specific methodology preferences
- Additional services
Trust Your Gut (But Verify)
If something feels off, investigate:
- Request detailed technical discussions to validate expertise
- Review their approach and methodology critically
- Check online reviews and industry reputation
- Do a trial project to validate working relationship
You'll work closely with this team for 6-12 months. Relationship quality matters as much as technical capability.
Final Thoughts
A software development partner isn't just a vendor—they're a critical extension of your team. 47% of projects fail because companies optimize for price instead of value.
The companies that succeed do rigorous due diligence, trust their judgment, and select partners who share their values.
Ready to discuss whether we're the right fit? Contact Arven Digital for an honest conversation about your project.