A very good article and I like Simon’s pragmatic approach. I think we need more of these types of educational articles about web development.
Publications like SmartCompany have an opportunity to educate their readers about how to choose a good web designer. Bottom line is that, like any service provider you engage for your business, research them. Understand if they are a sole trader or a business, what their track record is, whether they are part of any association and who their customers are.
Communication is the key. Customers have expectations of how the process is to go. Unless you prepare them for the inevitable variables likely to happen, especially with larger jobs, the result will be frustration when the web developer has not met those expectations.
Lets stop stereotyping web companies and educate people, and help them choose reputable organisations.