if its a shallow chip, just file it down (on both sides of the blade ofcourse
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I usually prettymuch finish the part of the handle close to the blade (and if i have a part sticking out at the back i finish that as well).
Then glue on one side.
Drill the holes in the glued side.
Stick on the other side, and there you have to make sure the finished parts line up nicely.
Drill the other side through the first side and the blade, and then the fun of shaping the rest of the handle begins.
I usually start with a figure saw, work the saw markt away with a file/rasp.
The end where i make the scales flush with the steel is a slow process of sanding, first 80 grid to speed it up a bit, then 220 until i see it just tough the steel.
The last part i do with 400 grid.
Depending on the material i'll sand it down to 600 and oil it of (woods like ebony and african blackwood) sand to 1200 grid and give it a nice shine on the buffing wheel (dirty job btw)
I never varnish a handle, it doesn't penetrate far into the wood so once you nick the varnish, stuff like water, blood and other muck penetrates the wood and makes it look dirty.
A good start is to buy a book on knifemaking (e.d. loveless).
They contain great pointers on how to....(fil in task)