The competition is fierce. There are hundreds of excellent writers out there, and they're all clamoring for a place at the top. Low contest scores and negative critiques can blow holes the size of Argentina in your self-esteem. If finding out your book isn't the brilliant piece of prose you thought it was makes you want to take up tatting instead of writing, contests may not be for you. If you're the sensitive type and can't get beyond emotions to view this as a learning experience, you may want to think twice before taking the plunge.
Contests are also ego boosters.
When you win, place or final, you know your writing can compete with the best. High or improved contest scores and positive critiques can give you that lift you need, tell you you're making progress, and carry you through the dark days of rejections. Contests can provide opportunities for growth in a variety of ways that are difficult to get elsewhere during the unpublished years. The most important thing is to understand what contests can or can't do for you before you make a decision to spend the time and money. I speak from experience.