I think that, ultimately, it depends a lot on the economics of the business you want to go into. Competing with eBay is probably not an easy thing to do, for instance.
Also, you want to be able to do a good job in your niche, not just be a hanger-on fighting for the scraps, knowing that, by and large, the big guys in the market are better.
speaking as someone who gets, ah, the scraps, I can tell you that you must be clearly, objectively, measurably better at /something/ or else you will not get any customers. No scraps, even. When I started out way back when, johncompanies was the leader. I priced competitively, and got three paying customers.
On the other hand, you need to understand that there is no need to be better at /everything/ -as the little guy, that's going to be quite difficult. You can thrive on a sub-niche that your competitors may not serve as well as they could.
I haven't bought any competitors, but I've seen several go under (one of whom ended up renting space from me to host his personal stuff.) and it seems that the common thread with the ones that went over was that they were 'pretty good' in all areas... they didn't have one or two areas where they were clearly better than the competition.
Also, you want to be able to do a good job in your niche, not just be a hanger-on fighting for the scraps, knowing that, by and large, the big guys in the market are better.