A common problem with Color Classics, especially if the drives have been used in other machines, is the lack of the proper system version or enabler.
Color Classics require 7.1 (not 7.0.1) or later to boot. If you're using Apple's free system downloads, only 7.5.3 will run on the Color Classic.
If you have System 7.1 (not free, came bundled with every CC sold) you will need System Enabler 401. If the only 7.1 you have is the retail version, you will need to install the enabler separately. Put it on your Install 1 disk (and your Disk Tools disk in case of an emergency). The enabler is available for free from Apple's website.
Of course, hardware could also be the issue. Do you have another SCSI hard drive to test with? Try putting a different drive in the CC to rule out SCSI controller problems.