Quality Doesn't Really Matter
The quality of the demo doesn't matter much. The only thing that matters is that you can hear all the parts of the song clearly enough to know what is there. With recording gear being more affordable than ever, you can buy a portable hard-drive digital recorder to keep in your practice space or you can spend the money on a computer-based system that uses FireWire or USB recording interfaces. It's up to you and how much you can afford.
Flush Out Ideas
One of the biggest time wasters in the studio is not clearly knowing what the basics of the song are. Although you should allow for some spontaneous creative awesomeness while in the studio, you should be 90-95% sure of what the basic rhythm parts of the song should be. The bass and drums should know exactly every hit, every nuance and every syncopation prior to rolling the first inch of tape (I know this is an antiquated reference, but stay with me). Home demos are a great way to make sure you flush out all the basics and get your basic melodies down to their fighting weights before the session. You don't want major surprises.
Try Out Different Tempos
If you plan on recording with a metronome or “click track” I recommend that you try out different tempos before you go into the studio. There is a common illness called the-song-is-too-slow-itis that may ruin a good take of a song. Often times, drummers will feel like a song is too slow the first time you track with a specific tempo and will ask for the click to be sped up. 7 times out of 8, the slowness can be attributed to nerves or adrenaline, yielding a much faster take than the band had originally intended. By playing your song to different tempos prior to, you will know what the ideal pace will be.
Learn About the Process
By working on demos on your own, you will get insight into the recording process and demystify some of what the engineer is doing in the studio. This greater understanding will increase your comfort level in the studio and allow you to better communicate with the engineer and producer.
Get Fan Feedback
Another bonus to having some demos of your songs available before recording is that you will be able (if you have fans) to share these with your fans and solicit their feedback. This will make them feel like they are part of your creative process and that they have a voice in your music. Fans an be a great source of creative input that may help you make better and more marketable music.
Pre-production is your friend and should be used frequently.
