Gather your reference images of the dog and place them near your sculpting station. Use an actual dog, if possible, although it might not be easy to make it sit for long periods of time. Use several quality images showing the dog from different angles. Use one image showing the dog in the sitting position as your main reference. A sitting dog is much easier to sculpt than one that is up on all fours.
Knead the clay like bread dough until it is smooth and consistent. Use about 2 pounds for a small model of the dog. Form a ball with the clay and place it down on the table, pushing it down to flatten the bottom.
Form the general shape of the dog using your hands. Press in on the sides with both hands to make the clay rise. Stop pressing in the sides when it has reached the approximate proportions. Leave the bottom third a little wider to accommodate for the legs on each side and tail curled around on one side.
Form the front of the dog at a right angle (90 degrees) to the table and the back sloping down at about 45 degrees. Begin forming the head, including the snout that protrudes forward above the chest and legs.
Pinch the sides at the back of the head to form the ears. A German Shepherd would have ears pointing up, whereas other breeds may have ears that hang down. Pinch and push down if your dog's ears hang.
Push in with both thumbs where the eyes are located. Only push slightly to indicate the end of the snout and the forehead. Detail the eyes of the dog carefully using a knife or needle tool. Blend with a damp sponge.
Keep the width (side to side) of the dog consistent for the neck and chest. The width of the torso may get slightly less just above the hind legs. Form the hind legs on each side including the visible portions of the lower legs and paws.
Remove clay from the front, between the front legs, as well as behind the front legs. Refer to a reference image showing the dog in a side view to help you form this section.
Detail the front legs and paws. Use a fork to create wavy fur lines and use a wet sponge to reduce the marks and to blend them, making it look more natural. Detail the fur on the entire dog until it looks complete. Use the sponge to remove tool marks and to blend grooves and cuts.
Let the model dry for several days before applying any paint or stain. Acrylic paint works well and can be diluted with water to create a colored wash, rather than a thick coat. A wash may look more realistic.