Read up on standard methods of qualifying contractors. Some contractors do not have sound financial management systems. They lump all proceeds into one common fund, borrowing from one job to finance another. They do not maintain accurate balance sheets or cost records with which to analyze contracts in progress. Asking for and checking a bank reference and two supplier references may uncover this problem.
Poor estimates are also a tip-off.
Staff, if any, is often temporary. Personnel management and quality control can be lacking. This can be caused by severe competition, particularly among the smaller and newer concerns, or more often by inexperience in pricing their work. Some newer firms do not have a good handle on their internal overhead costs such as insurances, fringes, sales costs and downtime. When a contractor bids exceptionally low, you may wish to check the company's history and references more closely.