Step 1: Materials
Small saw (for the dowels)
Some optional decorative materials:
Clear spray paint
Yarn / string
Step 2: Cutting
The wands specified in the Harry Potter books average about a foot long, and range from 16" (Hagrid's) to 9 1/4" (Peter Pettigrew) with a Professor Umbrige's referenced only as 'unusually short'. Source.
I cut the dowels I had found to about 8 - 13 inches since I was making the wands for young children.
PS: Honey suckle grows long narrow stalks perfect for wand making, if only slightly bent. They can be used as easily as dowel rods after shaving the bark off. Plus, the plant is invasive, so kill it all you want!
Step 3: Sanding
Sand at a steep angle first and spin the dowel on the moving belt.
Next, spin it again on a less-steep angle.
This gives it a rounded edge.
Depending on the quality of the dowels, you might consider sanding the shaft as well.
Step 4: Staining
After a while, I worked out a much faster way to stain the wands:
Put on a pair of rubber gloves, grab a napkin, dip the napkin into the wood stain, then apply it to the wand. You will also want to dip each end of the wands into the wood stain as you paint. Always rub off excess stain with another napkin.
Step 5: Decorate and Personalize
When I passed them out (in a neat wand choosing ceremony) I told the kids several ways to decorate their wands:
Using yarn, wrap P-loops around and tighten them
Use some other pattern with yarn for some neater effects
Here is an instructable about using hot-glue on wands.
You could try some paint
Think of something new.