As a writer, I can say that contests were the best things that happened to me.
I'm not exaggerating. I learned really fast that contests are the best way to separate the Wannabe writers from the Real writers, the ones who'll stick with it for the long haul, the writers who have to write or die, the writers who can't stop making up stories in their heads even when the computer is fried and there are crayon drawings on every piece of paper in the house.
I got terrible scores in the first year I entered contests, but it was money well spent. I got feedback from several different people, cluing me in to the areas I needed the most work on.
Contests gave me realistic feedback from people who weren't only writers, but readers. I learned fast that my story needed work if it didn't immediately grab a contest judge, no matter who the judge was--a new writer, a contest winning writer, a published author, or an agent or editor.
Because in a bookstore, a book on the shelf has about 20 seconds to grab the reader. Contests told me if a story was compelling enough and interesting enough to continue working on.
Also, judges weren't my friends, who take care to put lots of happy faces and LOLs in my manuscript, who don't always see the flaws in the story. Contest judges gave me honest feedback that helped me polish my writing until it was good enough to land on an editor's desk without embarrassment.
As my writing got better, I also got terrific exposure to editors and agents judging those contests. I had several requests for manuscripts because the final round judges had liked my writing. Other editors and agents knew my name because I had finaled and won in contests.
My lowest score usually had the most useful feedback, because if a judge didn't "get" certain parts of the story, there's a good chance an editor won't "get" those parts of the story, either. When I finally did get my publishing contract, my writing had more universal appeal because I'd heeded those judges' comments.
And now, as the reviews come rolling in for my debut novel, I can thank every contest I entered for preparing me. Some people liked my story, but others didn't--but my skin is like dragonhide because of all the contests I entered, all the feedback I received.
If you are a Real writer, if you have to write because the words are screaming to be written down, then take the chance and start entering contests. It's not always pleasant, but it pays off.