How to Choose a Software Development Company Without Getting Burned
A SaaS founder we know hired a development agency based on three things: a polished website, a convincing sales call, and a rate that was 20% below the competition. Eight months and $190,000 later, she had a half-finished product, a codebase that no other team would touch, and a contract that made it nearly impossible to walk away.
She is not alone. According to a 2024 Standish Group report, 66% of software projects either fail outright or deliver significantly less than what was promised. The single biggest predictor of whether a project lands in the successful third? The quality of the team building it.
Picking the right software development company is not about finding the cheapest option or the flashiest portfolio. It is about running a structured evaluation that surfaces the things most buyers miss. Here is how to do it.
Step 1: Define What You Actually Need Before You Start Looking
Before you Google "best software development company," spend 30 minutes writing down the answers to these questions: What does the software need to do in its first version? What is your budget range? When do you need it live? What systems does it need to connect to? What technical skills are required?
This is not about writing a 50-page specification. It is about having enough clarity that you can evaluate whether a company has done similar work before. If you cannot describe your project in two paragraphs, you are not ready to hire anyone.
Step 2: Evaluate Portfolio Depth, Not Breadth
Most companies show you a portfolio with 30 logos and assume that volume equals credibility. It does not. What matters is whether they have built something similar to what you need - in the same industry, at a similar scale, with comparable technical requirements.
- Ask for 2-3 case studies that are directly relevant to your project type
- Look for specific metrics - "increased conversion by 34%" beats "redesigned the homepage"
- Check if they built the whole product or just a small piece
- Ask what tech stack they used and why they chose it
- Find out if the product is still live and maintained
A company with 5 deep case studies in your domain is a far better bet than one with 50 scattered projects across every industry.
Step 3: Test Communication Speed Early
The number one complaint about development partners - ahead of budget overruns, ahead of bugs, ahead of missed deadlines - is poor communication. And you can test this before you sign anything.
During the sales process, track these signals: How fast do they respond to emails? (Under 4 hours is good, under 24 hours is acceptable, over 48 hours is a warning.) Do they ask clarifying questions or just agree with everything? Do they explain technical concepts in plain language or hide behind jargon? Can they articulate what they would not build and why?
If communication is slow during the sales process - when they are trying to win your business - it will be worse once the contract is signed. This is one of the most reliable indicators we have seen across hundreds of projects.
Step 4: Run Technical Due Diligence
If you are not technical yourself, this step feels uncomfortable. But skipping it is how you end up with a codebase that costs $80,000 to rebuild six months later. You have two practical options.
- Hire a fractional CTO or independent technical advisor for 2-3 hours to review their proposals, ask questions about their architecture approach, and flag risks
- Ask the agency to walk you through their code from a previous project (with client permission). Watch for clean structure, automated tests, and documentation - not just whether the app looks nice
Specific things your technical reviewer should check: Do they use version control properly? Do they write automated tests? How do they handle deployments? What is their approach to security? A company that cannot answer these clearly has not built anything serious.
Step 5: Run a Paid Trial Project
This is the single most effective way to evaluate a development partner, and almost nobody does it. Before committing to a $100,000+ engagement, spend $3,000-8,000 on a small, self-contained project with a 2-4 week timeline.
Good trial projects include: building a single feature or screen from your product, creating a technical proof of concept for the riskiest part of your system, designing and prototyping one user flow end-to-end, or auditing and refactoring a section of your existing codebase.
During the trial, evaluate everything: How do they handle ambiguity? Do they deliver on time? Is the code clean? How do they communicate progress? Do they push back on bad ideas? The trial will tell you more about a partner in two weeks than six months of reference calls.
Step 6: Check References That Actually Tell You Something
Every agency will give you references from their happiest clients. That is useless. Instead, ask for references from projects that hit problems - a missed deadline, a scope change, a technical challenge. How a company handles adversity tells you far more than how they handle smooth sailing.
- "Can you connect me with a client whose project did not go exactly as planned?"
- "What happened when you disagreed on technical approach?"
- "How did they handle a missed deadline?"
- "Would you hire them again? If not, what would you do differently?"
- "What surprised you - good or bad - about working with them?"
Also check LinkedIn. Find people who have worked at the agency and moved on. Former employees who speak positively about their experience are a strong signal of a healthy organization.
Step 7: Read the Contract Like It Matters (Because It Does)
Three contract clauses that should be non-negotiable for you. First, IP ownership: you own the code, period. If they want to retain ownership or license it back to you, walk away. Second, source code access: you should have access to the repository from day one, not just at the end. Third, exit terms: what happens if you need to end the engagement? Can you leave with your code and documentation, or are you locked in?
A good partner will not fight you on any of these. If they do, it tells you something about how they view the relationship.
The Evaluation Scorecard
Score each potential partner on these seven criteria, each on a 1-5 scale. Relevant portfolio (do they have directly applicable experience?), communication speed (did they respond promptly and clearly?), technical credibility (did they pass due diligence?), trial project (how did the small engagement go?), references (what did clients - especially unhappy ones - say?), contract fairness (IP ownership, code access, exit terms), and cultural fit (do you actually enjoy working with them?).
Any company scoring below 3 on communication, technical credibility, or contract fairness should be eliminated regardless of their scores elsewhere. These are non-negotiable foundations.
The companies that score highest on this framework are rarely the cheapest. They are also rarely the most expensive. They are the ones that treat your project like a partnership, not a transaction. That distinction will save you more money than any discount ever could.
