The Steps:

1.
Read plenty of short stories. Nothing can help you “learn” how to write a good short story better than reading good short stories. Take note of the style and how they have used the small amount of words to their advantage. Choose authors that you enjoy, and also choose some of the “classics.” Pay attention to how the authors develop their characters, write dialogue, and structure their plots.

2.Gather ideas for your story. Inspiration can strike at any time, so carry a notepad with you wherever you go so that you can write down story ideas as they come to you. Most of the time, you’ll just think of small snippets of information (a catastrophic event around which you can build a plot, a character’s name or appearance, etc.), but sometimes you’ll get lucky and a whole story will reveal itself to you in a couple of minutes. If you have trouble finding inspiration, or if you need to write a story in a hurry (for a class, for example), learn how to brainstorm.

3.
Choose an idea and start with basics of a short story. At the very least, a story should have an exposition (the story leading up to the climax), rising action (events leading to the turning point), a climax (a turning point in a story brought about by conflict between characters or within a character), falling action (your story begins to conclude), and a resolution (a satisfying ending to the story in which the central conflict is resolved - or not). Move backward or forward from your starting idea (it may or may not be the beginning of the story), and ask “What happens next?” or “what happened before this?”

4.
Know your characters. For a story to be believable, the characters have to be believable, and their actions should appear inevitable given who they are. In other words, you should know as much as possible about your characters, from what their central motivations are to what their favorite foods are. You won’t include all this information in your story, but the more you know, the more your characters will come to life, both for you and for the reader. Sometimes it helps just to listen to unimportant conversations between characters in your head, even if it won't be in the story.

5.
Limit the breadth of your story. A novel can occur over millions of years and include a multitude of subplots, a variety of locations, and an army of supporting characters. The main events of a short story should occur in a relatively short period of time (days or even minutes), and you typically won’t be able to develop effectively more than one plot, two or three main characters, and one setting. If your story has much more breadth, it probably needs to be a novella or novel.

6.
Decide who will tell the story. There are three main points of view from which to tell a story: first-person (“I”), second-person (“you”), and third-person (“he” or “she”). In a first-person story, a character in the story tells the story; in the second-person the reader is made a character in the story; and in the third-person, an outside narrator tells the story. (Second-person narration is rarely used.) Keep in mind that first-person narrators can only tell what they know (which will be limited to what they see firsthand or are told by others), while third-person narrators can either know everything and explore every character’s thoughts, or be limited to only that which can be observed.

7.
Start writing. Depending on how thoroughly you’ve sketched out your plot and characters, the actual writing process may simply be one of choosing the right words. Generally, however, writing is arduous. You probably won’t know your characters and plot as well as you thought, but it doesn’t matter. Outlines are not the same as stories, and actually writing a story is the only way to complete one.

8.
Come out swinging. The first page—some would say the first sentence—of any writing should grab the reader’s attention and leave him/her wanting more. A quick start is especially important in short stories because you don’t have much room to tell your story. Don’t dilly-dally with long introductions of the characters or uninteresting descriptions of the setting: get right into the plot, and reveal details about the characters and setting piece-by-piece as you go along.

9. Keep writing. You’re almost certain to hit some bumps in the road to finishing your story. You’ve got to work through them, though. Set aside a time to write each and every day, and make it a goal to finish, say, a page each day. Even if you end up throwing away what you wrote on that day, you’ve been writing and thinking about the story, and that will keep you going in the long run.

10.
Let the story "write itself." As you write your story, you may want to turn your plot in a different direction than you had planned, or you may want to substantially change or remove a character. Listen to your characters if they tell you to do something different, and don’t worry about scrapping your plans altogether if you can make a better story as you go.

11.
Revise and edit. When you’ve finished the story, go back through it and correct mechanical mistakes, as well as logical and semantic errors. In general, make sure the story flows and the characters and their problems are introduced and resolved appropriately. If you have time, put the completed story down for a few days or weeks before editing. Distancing yourself from the story in this way will help you see it more clearly when you pick it back up.

12.
Get some second opinions. Send your revised and edited story off to a trusted friend or relative for revisions, edits, and suggestions. Let your reviewers know that you want to hear their real opinions of the story. Give them time to read it and think about it, and give them a copy that they can write on. Make sure you consider everything that your reviewers tell you—not just the parts you would like to hear. Thank your reviewers for reading your story, and don’t argue with them.

13.
Incorporate whatever edits, revisions, and suggestions you feel are valid. Your writing will be better if you can carefully consider constructive criticism, but you don’t have to follow all the advice you get. Some of the suggestions may not be very good. It’s your story, and you need to make the final call.