The first step is to be inspired. Sometimes this is as simple as hearing a little tune in your head and developing it, but it can also be something that's happened to you or a friend that moves you so much that you need to release your emotions in some way. My way is songwriting.

 The second step is developing your initial idea. Figuring out how to translate that little tune in your head onto a guitar or bass and then adding drums and other instruments.

The third step is lyrics. These can be the easiest or hardest part. If you've been inspired deeply then they just flow out of you, but sometimes it takes a little time and effort to coax them out. 

The final step is recording it all and then mixing and mastering all the tracks. Then allowing others to listen and (hopefully) give you some good feedback, but constructive criticism is helpful as well.