Although I paid about $750 to have my first book A Mosaic of Believers indexed, I didn't end up liking the job. Although not every reader uses a book's index, I came to see it as an opportunity to promote ideas and concepts and to show how my book speaks to those. So I indexed my next two books.
Here's a quick how-to:
Get a stack of index cards. Go through proof sheets of your book marking names, places, organizations (those are easy), and also ideas, concepts, theoretical items (which may not be addressed directly by actual name or label). Put the names/labels on the header line of an index card, a separate card per header. List page numbers relevant for each header. As your stack of cards grow, place headers in alphabetical order using a little card filing box.
As you go through the proof sheets, you'll see your index cards grow, and you'll also have more ideas. You might create new index cards and re-think how to group together other pages that correspond to these new ideas.
When you finish going through the proofs, sort your index cards. Perhaps some (most?) can become sub-ideas, or sub-themes, and those will be placed under cards you now assign as main headings. You can create cross-reference headings if you have related ideas (see xyz…) .
It took me about 4-5 days (not full time, amidst all else) to work through proofs, creating cards, and getting it done.
Then I had a student type up my headings followed by page numbers, and put sub-headings underneath also with page numbers. All headings are in alphabetical order.
Proof read your final sheet of indexed terms and page numbers. Send to publisher!