It’s important to understand how a beta reader can fit into the development of your writing. Making the best of all the resources at hand will lead to a higher quality end product, and after putting all that effort into your book, it makes sense to follow through properly.
A beta reader isn’t a proof reader. They aren’t an editor. They do not even need a high standard of written English themselves. But the one important thing about a beta reader is that they are a reader, and preferably one who enjoys the genre of books you’ve written and understands how stories* work.
You should expect a beta reader to read your novel* and give honest feedback. They should comment on characters, plot and flow of the novel. They should leave you with a better understanding of how your novel works for a reader: which bits are unclear, which bits are boring, which bits really help the reader imagine the scene, whether the characters work well. They should point out any inconsistencies they come across, and any plotholes they notice. Some might offer to correct errors for you, but please remember that they are not professional proofreaders, and as there are likely to be plot/structure changes needed as a result of the beta reading, it’s a little early to worry too much about spelling errors and typos. Some writers like to give a beta reader a questionnaire to fill in, or a set of targeted questions, but you should not expect a fully detailed critique of your novel. Remember that the beta reader is reading for free, or for a very small fee, and is not necessarily a writer themselves. They should, however, be able to explain whether a book works for them, and give reasons to justify their answer.
You can find beta readers via a site like goodreads, or kboards, or you could ask friends or family – but if you know the beta reader personally, you need to make it clear that you’re not looking for a cheerleader (although they can serve their purpose!) but for constructive criticism. Some established authors have websites or facebook pages where they have built up a network of people who may be called on to help out, but at first you might need to try out a few people and see who responds in good time, who gives useful feedback and who really isn’t worth the effort of sending your work to. As long as they respond in reasonable time and you find their observations helpful, it’s worth putting them on a list for future runs. Remember that they are reading in their spare time; don’t nag them daily, but you should be prepared to set a deadline and/or give them a nudge if you hear nothing for more than a couple of weeks. Usually you would be expected to provide either a Word document or a PDF format, but some beta readers prefer an epub. Personally I prefer to add comments to a Word document or sticky notes to a PDF. This does limit my reading to the computer or laptop, but it means I can add comments as I go through.
A beta reader should be contacted once you have a complete draft you want feedback on, but before you start to consider an editor. You can choose whether to build up a close relationship with one beta reader or use several, which gives you the benefit of a variety of opinions but can be more time-consuming to manage. You aren’t obliged to implement everything a beta reader might suggest, of course, but if two or three people suggest a passage drags then that’s an area you should definitely focus on, and likewise if a passage is confusing or unbelievable, or if there are plotholes noticed, or repeated issues with a character.
If you feel you want more help than a beta reader can offer, some editors are willing to work closely with you on the plot; this is called substantive editing, and can be expensive, depending on the experience and ability of the editor. Bear in mind that you are expecting this person to spend a lot of time with your work, and to go through it thoroughly; all this is time-consuming, and the editor has to charge a sensible amount in order to make a living. On the other hand, you should make sure you are happy with what they offer before agreeing to the work. Most editors will give a free sample edit so that you can see how compatible you are. Some editors might be willing to provide a cheap beta read/critique along with a sample edit. This will provide you with basic feedback and allow them to see whether they feel they can help you. Again you are not obliged to follow their suggestions, unless the editing is provided as part of a publication deal, but why pay for someone’s advice if you are unwilling to follow it?
Once you have considered carefully all the feedback from the beta reader(s), it’s time to redraft, and depending on the amount of changes made you might feel you need another beta read. Take your time, and redraft/rebeta as often as you feel you need, but remember that you will never, ever reach a point where you feel your novel is perfect! Just make sure you have done the best you can before you hand it over to an editor for a final polish.
* I have spoken here about novels and stories, plotlines and characters, but of course what I say applies to other types of writing as well, for example memoirs and other non-fiction. You may, however, find it harder to find beta readers willing to help you out for these other types of writing. This is one example of where a paid beta might be useful or necessary.