One question I hear quite often from my students is "when will I be ready to compete?" Two things have to come together for a student to successfully compete. Of course their technique must reach a level appropriate for their level of competition, but more importantly, they must have the mental fortitude and confidence needed to be a competitor.
To get your technique at a competitive level is just a matter of time and training. As long as the student is of good physical condition and diligent in their training, they will be able to reach a competitive level. It is my opinion that the second requirement is much more difficult to attain. If the student doesn't already have a competitive drive and aggressive mindset, it is a very difficult road to develop.
There have been several occasions where I have told my student they have the skill needed to compete and their response is "I'm not sure I'm ready. Maybe if train for another 6 months." This is ultimately a lack of confidence not a lack of skill. If they believed in themselves and me as a coach then they should be eager to compete, but because they are struggling with those inner demons telling them they aren't good enough or that they are weak, they hesitate.
This is a very difficult situation for me as a coach because I know they want to compete. They have usually told me this themselves. I want them to go out there and be successful and I also know that time is limited for a fight career. The earlier you can start the better. Your body can't handle competition as easily as you age and eventually you have to slow it down due to longer recovery times. However, I also know that until they develop confidence in themselves, they aren't ready to step into the ring. If they don't have confidence and they experience a bad loss then it will seem like all of their negative inner beliefs are being proven true and this often leads to them giving up on martial arts all together.
So bottom line is you are ready to compete when your technique is good enough and when you are mentally prepared.
Why should you compete?
This is an easier question to answer. You should compete because this is the best opportunity to test your skills and see what you can really do short of getting in a fist fight at your local bar. When you spar in the dojo, everything is more or less controlled and your training partner should be watching out for your well being as much as you are. Yeah sparring can be high intensity and injuries can still happen, but it is still not a real fight. Your partner isn't really trying to hurt you and nothing is really at stake.
Competition is the only legal way to put yourself in a position where you have to fight for real. Your opponent DOES want to hurt you. They want to win and you are in their way. Of course competition isn't like a real fight either. There are rules and a referee their for your protection and depending on what venue you are competing in, their is probably some sort of protective gear, but that doesn't change the fact that the person standing across from you is trying to take your head off or choke you unconscious.
It is this type of high pressure experience that will transform you from an average martial artist to a great martial artist. An experienced competitive fighter will KNOW what they are capable of. They will KNOW how they respond under pressure. Someone who only does controlled sparring in the dojo should always have a little doubt in their mind, because the honest truth is they have never been tested.
What makes a champion?
Lastly, I would like to talk about what makes a champion. I have spoken about what is takes to be a competitive fighter, but a competitive fighter is not necessarily a champion fighter. To become a champion requires a higher level of dedication than to just be a good competitive fighter.
First, you must be diligent in your training. Someone who trains twice a week for 10 years still has a high likelihood of losing against someone who trains 6 days a week for a year. The specifics of how to train were covered in my blog post "Ancient Black Belt Secret #1 - Consistent Training" which you can read here.
Secondly, you need to be great at what you do. You don't have to be great at everything. You don't need to know every striking combination, throw/takedown, or submission. You just need to be a well rounded fighter who is really good at implementing their fight strategy.
Thirdly, the one thing all champions have in common is a high level of confidence in themselves and their ability. This hearkens back to the second requirement I mentioned above to become a competitor in the first place. Regardless of how long you've trained or how much experience you have, you will not be a champion unless you believe you can be.