Start by covering your work surface well. The paint easily bleeds through burlap and will ruin furniture.
On the burlap, draw a pencil shape and outline the eraser, lead, and "wood" part of the pencil. The pencil can be any size you choose.
Cut the shape from the burlap.
Paint the eraser, silver band, and "lead" parts of the pencil in the respective colors. I love a pouncer brush for really getting into the burlap fibers.
After the paint has dried, use a small paint brush to outline the different pieces in white. Allow to dry.
Across the body of the pencil, add white polka dots with a pouncer brush.
Now, add a monogram or message to the body of the pencil. Freehand the words using a pencil, then trace with a small paint brush dipped in black paint.
For hanging, add a small piece of wood to the back at the top of the eraser portion with tacky glue. After that has dried, add twine to the wood strip for hanging.