The internet is a great place for someone to make their fortune, but the secret is out. It is now unlikely that you will be able to get to the top of the search engines without first clawing your way through a crowd of competitors. The trick to making this journey easier to educate yourself on your competitors and taking advantage of any opportunities you uncover.

Known Competitors

If your website isn't a unique idea, you probably already know of a couple other companies that are doing what you're doing. For example, if you are starting a web design company, you can do a quick Google search and see that there are easily over a million sites, but that doesn't mean it's impossible for you to rank well. If you refine the search down to the city you live in, the number of sites is a great deal smaller and from there you can begin to develop a strategy. Write down your top competitors, and let's further research how you're going to beat them.

Who Ranks Well for Your Keywords?

Do a Google search for your most desired keywords, and pay attention to who is showing up in the top 10 results for each. Is there one company that is dominating the search listings? Are there certain sites that seem to rank well for one topic, but poorly for others? On your competitor list, make a note next to the companies that are the strongest. Just by attempting to compete with the big boys, you will find you will get a great deal of search engine traffic that you never had before.

What is the PageRank and Alexa Rank?

What PageRanks do your competitors homepage have? If your site is a PageRank 1 and your competitors' are a PageRank 9, there's no way in hell you're going to be ranking above them in the foreseeable future. However, if you're a PageRank 4 and they're a PageRank 6, with a little dedication, you'll be able to chip away at that gap and eventually pass them with a long-term plan.
Alexa ranks are a completely different beast. A site may rank 100,000, and yours may rank 800,000, but your site may very well receive more traffic that the other does. This is because Alexa gathers data from users who have decided to install the Alexa toolbar on their browser. So, if a site has a group of Alexa users that happen to frequent their site, their site will be artificially inflated. If the Alexa rank is in the top 100,000 there is a fair amount of data gathered and you can be more confident in Alexa's results.

How Many Links do They Have?

Now that you know which of your competitors are strongest, you need to find out how they got so strong. Do a Google search for the website's name (make sure you do the search in the form "domain.com" and not just "domain," to eliminate a lot of false results). The results will show a rough number of how many links your competitor has. If it's a huge number, sit down, take a breath, and let's see how you're going to compete.
You can also use the link: command (search Google using the form "link: domain.com") and the link popularity checker to see how big a site is on the engines. None of these tools are exact, but if you use a few sources, you'll have a pretty good idea of a competitor's web presence.

Decide to Fight or Flight

Now that you've seen some rough estimates of the strength of your key competitors, it's time to take a real look at the work ahead of you. Do you have a chance to compete with the big boys? Are there no big boys and all you need are just a few links to overpower your rivals with?
Consider the data and think about whether you're OK working long hours to slowly work your way up to your competitors, or if you'd rather do SEO as an afterthought and just continue to have fun making your website. You might also decide that you've chosen the wrong industry and start looking for a new industry to compete in!
If you want to run, then come back when you've got a new idea. However, if you're ready to fight, read on!