1. First I come up w/ the concept of what the story is to be based on and I set the boundaries of what is/isnt possible in my fictional world.
2. Decide how long I want said story to be. And how many arcs there will be in the story.
3. Make the characters, usually done by profiling
4. Lay out a outline of the plot of the story.
5. Let it sit for about a week or two and just marinate on what I have plotted out so far.
6. Write the story, which is usually rife w/ plot holes and errors, but I want to get it on paper.
7. Re-read it and have other people re-read it and tell me what doesn't flow.
8. Fix plotholes, revise anything that doesn't make sense
9. Re-write

and that's pretty much it. 7-9 is what I have the most difficulty with because I have a hard time seeing errors in my own work.