(1) Promises high rankings in a short period of time, like #1 in 3 months.
(2) "Free 30 day trial -- just give us the admin password for your website."
(3) Says they'll submit your website to thousands of search engines.
(4) Gets you thousands of backlinks from spammy article submission sites and dubious directories. (If Google penalizes you for these links, it may be very expensive to get the directories to remove their link to you.)
(5) Uses reciprocal linking schemes from websites that aren't even relevant to your business.
(6) Uses paid links, paying websites to link to you.
(7) Won't answer your questions in language you can understand "because it's very technical" or "it's a trade secret."
(8) Requests copyright on meta data they create or edit.
(9) Claims to have an inside track to Google.
(10) Uses black hat techniques like keyword stuffing (using keywords repeatedly in an unnatural manner), invisible website text, affiliate links (websites built just for linking to each other), cloaking (showing search engines a different version of your website than what customers see) -- that may temporarily boost generic traffic to your website, but will eventually result in penalties and even de-indexing (your website will vanish from search resutls, nobody will be able to find you unless they have your website URL.
(11) Has no understanding of the new Google Hummingbird semantic search engine requirements. (Be sure to ask "How will you help our website comply with the new Hummingbird algorithms?")
(12) Uses plagiarized, copied and pasted, we-oriented, or generic text for your website content.
(13) Has poor skills in creating videos, photos, audio, and other rich internet media for your website.
(14) Has no real understanding of how to integrate Facebook, Twitter, GooglePlus, local niche directories, blogs, and your website, just promises to do so in vague but enthusiastic terms.
(15) Has no business or marketing savvy, just a lot of geeky energy and trendy buzzwords.
(16) Has trouble answering the question "What SEO tactics do you recommend NEVER using?"
(17) Avoids the issue of ROI and conversion (sales and other business goals) tracking.
(18) Has no expertise in web usability or how website design and layout will impact SEO.
(19) Puts a strong emphasis on esoteric analytics and obscure tracking metrics that may no longer be relevant.
(20) Has no idea how to optimize photos, video, meta tags, H1 - H3 header tags, or calls to action.
(21) Has no idea how to optimize for mobile, voice search, or clickless search.
(22) Contacts you via an unsolicited email promotion, writes bad English, and keeps hounding you with spam emails (which are illegal).