The biggest difference between a patch that looks crisp and one that looks muddy is line weight — thin lines under about 1mm tend to blur once stitched or molded.
Keep your color count reasonable. Two to six colors reproduce cleanly; large photographic gradients are better suited to printed patches than embroidery.
Text is the first thing to suffer at small sizes. If lettering is central to the design, consider a woven or printed finish instead of embroidery.
When you're not sure, send us the raw idea — our design team will flag any of this before production and send a free proof either way.