Draw two circles, a large one with a smaller one inside and a dot in the center. This is your visual reference. As an example call the outside circle 3/4" and the inside circle 1/2". Since all cuts will be made from the center point you would get 1/2 the size of the bit(in this case 1/4") on both sides of the center dot. To figure where you need to mark your guide spacing you subtract the bit cut (again 1/4" from the center point) from 1/2 of the guide size (in this case 3/8" from the center point) and come up with 1/8" on both sides of center. How does this work in making a pattern? Lets say you need to make a pattern for a 2" circle. If you will be using the inside of a pattern you will need a guide hole the size of your circle (2") plus the guide distance (1/8" on both sides of center) or 2-1/4" diameter hole. If you will be using an outside pattern to make a 2" circle you take your hole size (2") minus the guide distance (1/8" on both sides of center) and end up with a pattern 1-3/4" diameter. If you are only using one side of the pattern for an outside or inside cut you will use only the guide distance.(1/8", only on one side of center) Now you can change the numbers for your bit & Guide. I hope this helps.