I wouldnt say so, google often does this with new site and sometimes with old sites. Some call it google dance, sandbox or some say its just google responding to the new domain.
As long as your site is still indexed then I wouldnt worry much
If it was this why didn't the company state that rather than state there was some issues...
They should have stated what those issues are.
BUT
I am VERY VERY weary of SEO companies and the majority are just junk pouncing on new business owner with no clue of seo and charging ridicoulous amounts.
I would agree to some extent, but that's the same with any un-regulated industry, there will always be those that are trying it on.
Not that regulation is needed.
As for ridicoulous amounts that is a matter of opinion, £50pm (that could be one hour a month or two or 15 minutes!!) could be seen as a ridicoulous amount if the client expects the world. This is then obviously based on the competitivness of the niche/keyword requirements, what state the website is in etc etc.
From your post I can see clearly that you've a very vague knowledge of SEO if I were you I would dump this company for now and learn quite a bit about what important in seo and then hire when you have a good idea.
Horsesport is obviously willing to talk this through with her suppliers, so no need to just dump, as this could lead from frying pan into fire.
The way i do it is I know exactly what gets my site up in google and its mainly backlinks, and I make sure my titles are OK too. I use some freelancers to build my backlinks. I simply give them a list of the sites where i need my backlinks and they go and do the work and give me a report and i check to make sure my links are there. In addition I have article writers too for this and some software (even though its hardly used) for bulk article submissions and rss bookmarks
This is a solution, but it is only a good one if the business owner has enough time and enthusiasm to be bothered to do it.
If it was the case for everything there would be no trades in the world....we would all be doing the plumbing, web development, seo, painting, car repairs ourselves.
This way I know exactly what I am doing and getting for my site and its not unusual for a site to stay in the dumps or out of google even for up to 90days but consistance is the name of the game.
This is only true if you know you have totally research your niche, researched the directories to be seen on, the reciprocol links to acquire, the article websites worth publishing on, the coding clean as a whitsle...the correct use of tags, content written grammatically correctly but with a leaning to the keywords you are looking to be ranked in.
As written above this is only true if you have the time!! A lot of business owners do not have the time in the day to run the business of their business, let alonw learn something new.
Or they are in a completely un-competitive niche and get by with just having their titles adjusted and a couple of back links from some well known UK directories.
But do they really know the keywords that pay? Are they getting a good conversion rate? To be ranked number one getting a million visitors for 'Gold encrusted ankle bracelets' is no good if you are selling 'Flat screen TVs'
I know a slightly exaggerated example!!
You really need to know what this company is doing, you never know they may be even getting links from you from bad neighbourhoods that gets you banned in google. I really kind of have a feeling this company maybe robbing you.
This may or may not be true,
From what you say, it seems they are looking for keywords for you. Whats that, no way I would pay for that with all the various free tools available and if its on page optimization there really isnt any rocket science
If the free tools are correct!!
If the business owner has the time
If the business owner has the inclination
If they know their niche...my experience is that clients tend to know their traditional competitors, but not their virtual competitors, obviously as more and more businesses realise that having a decent online presence is a key marketing tool then the more the traditional will become the virtual as well.
But with some many off the shelf packages, cheap merchant services/shopping carts, then gandma Jo can set up in her one bedroom granny flat and beat the traditional at their own game!!
So the client knowing the keywords that pay is not a given....