The methodology I follow is one that takes a base inspiration or reference and attempt to extract concepts or ideas, add new elements when appropriate and visualise them into a character. From there, a general point forward can be found and can be iterated upon. The end goal doesn't necessarily have to represent the initial reference or concepts one for one. The initial reference is a seed from which something new can be developed from. Otherwise, a carbon copy would be as simple as copy and pasting the initial reference.
Here are some questions I ask myself when iterating:
What are the key ideas/ concepts or shapes that are presented?
What are some key colours & what are the contrasting colours?
Are there any cultural inspiration I may want to take into considerations?
What sort of clothes may fit or portray these concepts?
What elements do I want to add to enhance this design or change the concept?
Some useful tips I've used over the years are shapes.
From:
As shown in the the image, shapes have their own expressions and mixing them together can portray a different expression. For example, if I wanted to portray an elegant but powerful character I may try to include shapes like circles and triangles. Note, that I use these more so as a tool rather than a definitive rule. I've struggled a lot in the past worrying over these elements which ultimately took more time to produce a design.
A video that I found also really helpful was this by RossDraws:
It should be noted that this tutorial is from an animation/ films perspective so character designs tend to lean more towards fewer designs elements for ease of animation and to make a character more memorable. In games, we don't need to overly concern ourselves with the limitation of animation in terms of 3D games. But, I think it is still a useful tool for creating a foundation of a character design.
An artist that I really admire that takes a base reference and turn them into a character is Rinotuna: https://www.artstation.com/rinotuna
In contrast to the designs of RossDraws, Rinotuna has a lot of detail on there character designs but more than that, the use of clothing of all range is what stands out to me. You can see a story or bits of these characters' life in their designs. It should be stated that the work they post online are full illustration and aren't necessarily useful for when creating a game. It would be hard for a 3D modeller to use any one of these illustrations and turn them into a character.
Use Templates It Saves Time:
One of the most useful thing I found about a digital medium is that you can iterate a lot quicker simply because you can reuse assets you've made or found. While some people like to work from scratch, which is the only option if you are making a character with exaggerated proportions, I like to use templates where I can and if not make new ones with pre-existing ones. This may seem like you'll create the same looking character as the last design but it's about getting your idea out more quickly. And note these are templates, you can change or edit the proportions while working.
Mood Boards: Keep All your Reference Together
A mood board is a great way to build up an idea and collect valuable visual references. You can't draw something you haven't seen before or at the very least not as accurately as you can. Keeping all your references images together is incredibly useful. You won't need to spend time scrolling through a folder between different references. I like to use the software Pure Ref. It's a simple tool where you can drag images onto a canvas and build up a mood board.
Feedback:
I also love to ask people for their opinions. It's always useful to gain a different perspective on your work and share your ideas with the rest of the group if you're working in a team. I tend to become narrow-minded when designing so it helps to always get feedback when you can. What you can't see other may be able to point it out and suggest new ideas or elements you haven't thought about before.