Contests are a great thing for one reason and one reason only: they get you writing.
I belong to a writers group online called Backspace. There’s usually a contest a month over there and I’m in one right now. There’s no cash prize, no free subscriptions, not even a tee shirt that says, “I won a contest and all I got was this lousy tee shirt.” But what they do offer is free critiques. Everyone enters anonymously, and all who enter must comment about what worked, what didn’t, and then later vote on the stories they liked best.
It’s a terrific system and it gets you thinking about your writing. You see the story through other’s eyes and it’s done with complete respect, although don’t be shocked if someone says, “this didn’t work for me.” You need to listen to why it didn’t work and then apply to the piece and make it better.
Contests can also pull you out of your comfort zone. Often there are certain criteria to be met that you may not have used in your traditional stories. Perhaps you like to write in third person, and the guidelines require a first-person story or vice-versa. Or maybe you write about vampires and they want a ghost story. There’s one contest I like called “the first line” where everyone writes a story using the same first line. Great concept.
If you win or not isn’t the point of contests. I’ve used several contest entries that didn’t win to polish and submit to other markets, often with success. So consider entering just for the sake of building a portfolio, flexing your writing muscles, and the sheer pleasure of it.