Once upon a time, you hired a marketing firm to promote your new blue widget. You are proud of your widget, and you believe this marketing firm to be the best in the area. You meet, go over your widget, and they come up with a great plan to help you promote your widget.
After a few weeks, your phone calls are up, your website visits are up, but its still not what you expected. You still are the #2 widget company in town.
How would you feel if you came to find out that the same marketing firm is marketing another blue widget for your competitor? What if your competitor was spending more than you?
It's no wonder you're still #2, but what's more important is that there is definitely a conflict of interest here.
There are many SEO companies who take on several clients from one industry. Personally I just don't see how it's possible. If you hired us to rank your website number one for 'blue widgets', and so did your competitor, where would our allegiance lie? With the one with the bigger budget? The one who hired us first?
Neither. We won't do it. We will not take more than one client from any particular industry. We will not overlap targeted keyphrases. It'd be against our ethics, yet plenty of SEO firms do it.
Now, there are plenty of cases where our firm will have several clients from similar industries, but not competing ones. For instance, we could have a family dentist and an orthodontist. They are in the same general industry, yet seeking different customers and targeting different keyphrases. We couldn't take on a new orthodontist, though, unless they were physically targeting a different area.
Before you hire an SEO firm, make sure you ask if they already have clients in your industry. Get keyword specific and make sure they'll be focusing to get you to number one!