This is how I made a wooden "Customer Parking" sign.
For the woodwork, you'll need:
a plank that fits your sign contents
a pin router table (or a handheld)
a straight chisel a little smaller than the width of the recesses that make up your letters
and a table saw.
You'll also need black enamel paint and a little detailing paint brush
For the layout of your content, you'll need:
grid paper, a ruler, and a pencil
(optional) a photocopy machine
Step 1: Prepare Your Contents
I used a one inch grid to map out my contents because I found that it was a good scale for my letters and my intentions. You can use whatever size you feel suits your project, however.
Once I had drawn the first sheet of grid, I made two photocopies because the sign was going to need to be two feet long, with margins around an inch.
Generally, my letters were three inches tall and two inches wide, with a quarter-inch space between the letters. I used a ruler to measure out the spacing between letters and to draw straight lines. You can also eyeball it if you want. You can get a feel for spacing and such on your own layout as you go along, which worked for me.
Step 2: Transfer the Design to the Wood
I just used a permanent marker and held the tip on corners of grid and let the bleed through create dots on the wood (you can see what I mean in the photos). I then went back through and connected the dots on the wood with that same marker. To me, this seems to be the best way to get solid lines on the wood. I'm not so sure that copy paper would leave the best of marks. You can experiment if you want, however.
The only problem that I encountered with this method is that, at the seam of the two sheets of grid, the double layer of paper prevented me from letting the dots bleed through. When I did the "O" and the "K", I had to just free-hand it as accurately as possible.
Since the lines are just guidelines for routing, your letters won't end up exactly like they're drawn anyways.
Step 3: Routing and Touching Up
I had access to a pin router when I made this sign, so routing was no hassle. However, if you don't have access to a pin router, you can use a regular router; it'll just be harder. The pin router was easier because on the pin router, you move the board while the cutter remains stationary (except for depth).
In order to keep the cutter from taking off easily and cutting outside the boundaries, I came into the wood first at about an eighth inch for every letter. I then went back in another quarter inch or so deeper. I just eyeballed it because the board was warped and cut deeper on the left side (Home Depot lumber). This probably shouldn't change if you use a handheld router.
When I was done with the routing, I went back through with the chisel and touched up the perpendicular walls that were often a little screwed up. I also tried to clean up any circular marks that the spinning cutter left (such as the ones in the photo).
Step 4: Sanding, Painting, and Finishing
I used an orbital sander to get off all of the ink, and to sand off marks on the surface from the planer.
Another problem I encountered with the use of the permanent marker was the ink removal. Copy paper probably is better.
For the finishing, I just used black enamel in the letters, and two layers of a Minwax Pine stain.