I'd thought about writing a picture book story before - I guess any parent who reads to their children does at some point - but hadn't done anything about it because I can't draw, and I thought you needed to provide the illustrations. But hoorah! You don't.
The only person who should ever include illustrations along with a text is a professional illustrator. If you've written a story, you simply send that in using the proper format, and the publisher will match you with an illustrator. This is an important aspect of the publisher's job - think of good matches, like Roald Dahl and Quentin Blake.
What you need to do is present the text clearly, and give an indication of what the illustrations should contain if necessary. Necessary means if the illustration contains stuff that isn't in the text, but is necessary for the story, for example, if Red Riding Hood is skipping along the path into the woods in the text, the illustration might need to show the Big Bad Wolf hiding behind a tree. You put the information needed in brackets at the bottom, for example...
Fergus lived with his mother in a cave in the deep dark forest.
'It's time for bed, his mother said, but Fergus pretended not to hear. He was too busy having adventures.
(Illus: They're bears in a cave, Fergus is playing with his toys.)
And that's all you need to do. Simple. The number 1 is about formatting the text, which I'll do tomorrow.