I've never included this step before, but what I typically do is look for a design similar to what I want to make. In this case I'm just trying to figure out what shapes in XCS make a Gnome Ornament so I did a google image search for Gnome Ornament. I flip between XCS Shapes and the search results to plan the design.

I used the rounded triangle (see photo 1) and 4 ovals (from the left toolbar select Insert>Circle and draw an oval) to create the basic shape of the hat. At this point I like to see if I have a good shape so I select those elements and use the Combine>Unite in the top toolbar to check it (photo 2).

I know i'm going to want this to be layered, so I will use the face as a background. To draw the face, from the Shapes>Basic Shapes option on the left toolbar, I'm using the Oval with the flat top and bottom. I'm just using the hat as a guide as to how big to make the face (photo 1).

To add the beard I'm using 3 different shapes (From the Shapes>Basic Shapes option on the left toolbar I used the Rounded Triangle from step 2 and the Oval with the Flat Top and bottom from step 3. I also added a crescent moon shape. See photo 1). 

I arranged them to make a beard shape and then selected the three shapes (moon, oval with flat top and bottom and rounded triangle) and used the Combine>Unite option in the top toolbar (photo 2).

Next I drew the nose. I wanted it to overlap the hat and the beard (photo 1). Once I'm happy with the the placement, I copied the nose and paste it two times (CTRL+C to copy CTRL+V to paste). I select all three noses and from the top tool bar use the option Align>Left (photo 2). Then, while they are still selected, I use the top toolbar option Align>Top. This lines them up perfectly as we will use each one differently.

Select the hat. On the top toolbar, select Arrange>Send to back (photo 1). 

With the hat still selected, hold the shift key on your keyboard and select the nose (this will only select one). From the top toolbar choose Combine>Subtract (photo 2).

Select the beard. On the top toolbar, select Arrange>Send to back. 

With the beard still selected, hold the shift key on your keyboard and select the nose (this will only select one). From the top toolbar choose Combine>Subtract.

This will leave a grove for you to put the third nose when assembling the finished product. You should still have one more full nose.

From the left toolbar select Insert>Circle. While holding the shift key draw a small circle (the shift key makes it a perfect circle). Adjust the width and height in the top toolbar to 10mm (photo 1). Adjust the outline so it touches near the top of the hat.

While the circle is selected, choose the Outline option from the top toolbar and leave the offset at 2mm (photo 2). Press the OK button and the outline should overlap the hat. 

With the outline selected, hold the shift key on your keyboard and select the hat. From the top toolbar select Combine>Unite (photo 3).

While the hat is still selected, hold the shift key and click in the center of the original circle for the hanger. Right click and choose Group (photo 4).

I added the star shape from the left toolbar Shapes option under Basic Shapes. I also added a few snowflakes from one of my prior how-to tutorials (photo 1). I'm simply placing them on the design to see how the finished product will look.

Arrange each piece to cut separately (photo 1). Make sure the hanger on the hat has the hole in the center of it. Select all components and in the object settings under processing type set to cut. Depending on your machine and your cut settings may be different, but the above worked for me. On the snowflake I moved the speed up a little and did two passes to get a cleaner cut with the detail in it.

Pull pieces from machine and check the layout (photo 1 and 2). Paint each piece. Here are the colors I went with

Apple Barrel Indoor/Outdoor Acrylic Paint

Star - Golden Yellow

Hat - Hot Rod Red 

Face and Nose - Pumpkin Orange and White 

Beard and Snowflakes - White

I lined the back of the hat where it would overlap with the face with the Gorilla Wood Glue and placed that first. Let it dry for a few minutes. Then repeat for the nose, lining it up with the groove in the hat. Then repeat with the beard ensuring that it is lined up with the nose as well. Once i was certain everything was dry I applied the decorations to the hat.