Do I need a manager?
Managers become necessary once you've got a record deal and you need an advocate to represent your interests at the different departments of a record company. They help to coordinate efforts and get maximum results at radio, retail, and publicity. Many labels will want an artist to have a high-powered manager before a record is released and will often recommend top managers.
Managers can also help in shopping you for a record deal, but only if they have the connections to get your music to the right people. It's not impossible, but friends, family members, or acquaintances with no music industry experience usually aren't going to be able to get through locked industry doors, and will probably be in over their heads even if they can get through.
Good managers help the artist assemble a competent team of professionals to handle various aspects of the artist's career, including an attorney, a business manager (for financial affairs), a booking agent (for live performances), a merchandising company (for t-shirt sales, etc.) and more. Experience counts for a lot when it comes to choosing a manager.
At what point should I get a manager?
Most of the manager's duties and responsibilities come into play once an artist is generating income - especially through a record company association, but also for active local and regional artists who are touring and selling product on their own. Therefore, many people think it isn't really necessary to have a manager until there is an income-producing career to 'manage'.
One exception is the manager who can help you obtain a record deal. The right manager for this task can be hard to find, and must be carefully chosen. You don't want to get tied up in complicated legal contracts with inexperienced managers who will need to be replaced once a record deal comes along.
What are some key points in a management contract?
Most managers will take between 10% and 20% of an artist's gross income - including record royalties, publishing income, and touring and merchandising income. There will sometimes be a "sunset clause" i.e. a declining scale of payments due to the manager over a few years should you decide to fire or part ways with him (or her).
These are negotiable points, and many nuances and technicalities are involved. You should always have an experienced music business attorney (not your uncle Bob, the divorce attorney) review any management contract.