Read the manuscript through and make a storyboard either with thumbnail sketches or written descriptions of each illustration. Then do character studies of the main characters, if you're going to do them. Then do roughs for each illustration. These are detailed sketches. Pay attention to character and setting consistency. Get feedback from the author at this point. Or, if not the author, then at least a crit group. Someone other than you. Then do the finals.
You just have to wade into it and get started. One step at a time. Just keep moving. And it doesn't really matter if you do it on paper or on a computer. Whatever you're most comfortable with.
I do find it helps with consistency to do all the illustrations with common elements (same characters, same setting, whatever) together.