Look at posts and comments from the instance admin. Does this person seem to know anything about running a server or managing software? Do you like the admin's tone and attitude? Does it seem like the instance will be around for the long-term, or is it someone's hobby that they may abandon on a whim?
Look at the instance's ban list. Do you agree with the choices? Maybe you want your All feed to include exploding-heads and lemmygrad, or maybe you don't.
Does the instance seem to have a community theme that you want to be associated with? Some emphasize LGBTQ+ communities, or NSFW content, or particular political views.
The transparency in funding and discussion of donations, the country or state it is hosted in (local laws), does its moderation policy align with your values?
If it's a small instance fewer communities may be federated already so you may need to be the one to manually search for them for the first time (thus adding them to your instance's "all" feed). Larger instances will already have many communities discovered and a fuller all feed. Though with lemmyverse.net and some determination you can build up the federated communities list up entirely yourself (and give everyone registered there an expanded "all").
I did a lot of that building up because there wasn't much content that interested me coming through.
In hindsight it may have meant I should have chosen a different instance but now it's done I'm pretty happy and as you mentioned, it expanded the content for other users on the instance
The moderation policy can be important, on lemmy.zip they're somewhat anti-defederation so I spent a half hour banning all the big communities from the problematic instances
I am on Lemmy.zip and the admins are very transparent on the funding as they have set up an Open Collective page, and they are also very receptive to user suggestions and feedback.