The Traditional Publishing Route
Write short stories. You may take years or months to write several stories -- it all depends on the pace at which you write. One way to earn money writing short stories is by entering them in contests. If you plan on doing this, keep the length of the stories to between 2,000 and 5,000 words.
Submit your work to respected literary journals or magazines. Use the Poets & Writers website to identify suitable places to publish. It's a good idea to read the publications you wish to submit to first, in order to identify who publishes the kind of fiction you write. You may be able to read journals in your local library. Note that some journals, websites and magazines pay cash for publication, and some don’t. Some may "pay" you in copies of the journal once your story has been published. Read the fine print wherever you choose to submit your work. Also consider submitting your work to short story contests. It's common for short story contests to charge a fee. Consider setting an annual budget for this purpose, and try not to exceed it.
Publish individual stories. Earn multiple publication credits. Think quality and not quantity, but keep in mind that you will need at least 120 pages of content to be published into a volume. Take for example newly published writer Mahmud Rahman's 2010 collection of stories "Killing the Water," which comes in at 200 pages. If writing a series of short stories united by theme or character, it is still useful to earn publishing credits by publishing individual stories.
Propose your collection of short stories for publication to selected publishers and literary agents. You should earn a fee, known as “an advance” upon signing an agreement with a publisher. If you “earn out” your advance, you earn royalties on each sale. The business of securing an agent or publisher can be complicated. Before you submit your work, research the best way to write a query letter. Agents tend to be most interested in writers of full-length fiction. You may have more success submitting your short story book manuscript directly to university presses or small publishers. Choose targets for submission by checking on who publishes books of short stories that are similar to yours, or that you like to read.
Ebooks and Self-Publishing
Write a series of short stories. These may or may not be linked thematically and by character.
Edit your stories. If you’re not going the way of literary journals, you may wish to hire a freelance editor to help you. Alternatively, you may have an experienced friend who can help you.
Choose a self-publishing option such as an ebook publisher. Examples of publishers are Smashwords and Amazon Digital Text Platform. There are many more. Pay special attention to the percentage of each book’s sale that you will pocket, and how much the publisher gets.
Format your ebook. Popular tools to format your ebook yourself include: Calibre, Aspose, Mobi Pocket, Jutoh, feedbook.com, and BookGlutton. Some of these are free and easy to use. If however you'd feel more comfortable with an experienced book formatter handling the technical details, consider paying for someone to format the book for you. This could cost between $50 and $100. You will also need to design a book cover or have one designed for you. A professional cover design costs from $250-300. To find a service, search online and shop around. Find ebooks whose look you admire and find out who did their covers -- consider contacting authors directly.
Publish your book. Sell it on Amazon or other websites.
Market your book. This is the hard part and one of the main reasons that traditional publishers are so useful. Publishers give books credibility and can devote massive marketing resources. As a self-published author, you will be doing all the work yourself. Marketing your book will involve developing a list of sites that you'd like to review your book and sending them free copies. Also consider contacting local press and media in your area. Open Facebook pages and Twitter accounts for your book, get it its own website, and do the extensive online "leg work" you'll need to do in order to get the name of your book before the public. If you feel you need professional help, consider hiring a literary publicist. Search for one online, and determine if she's right for you by checking out her client list.