Determine the height and width of the waterfall in proportion to the pond. A wide, high waterfall would look silly with a small pond, while a skinny, shallow waterfall would look more like a dribble with a large pond. The higher the height of the fall the more noise the water will make as it falls and the more capacity the waterfall's pump will have to have. The pump's capacity should be on the label, as well as directions on how to compute how large a pump you'll need.
Dig out the pond to the desired depth. You'll need a deeper pond for certain water plants like water lilies or if you want fish. The pond can be shallower if it's primarily a water feature and not a water garden. Use the dirt from the pond to build up the waterfall's base.
Shape the base for the waterfall. Mound the dirt to the desired height of the waterfall. Water with a garden sprinkler so the dirt settles and compacts.
Place the waterproof liner over the mounded dirt and in the pond. It only needs to be on the front of the dirt so it is underneath the waterfall. The liner will be covered with rocks so it can't be seen. The liner catches any spray from the waterfall and directs it back into the pond. If you don't use a liner the waterfall won't be able to bounce off rocks before it hits the pond. The liner for the pond should overlap the lip of the pond by about 6 inches.
Build the waterfall using rocks placed on the liner over the base. If necessary peel back the liner and dig a shelf in the mounded dirt using the hand shovel so the rocks are stable. Replace the liner and position the rocks on the liner, nestling them in. Test the waterfall with a garden hose. Make adjustments in the rock placement and slope of the base if necessary.
Fill the pond with water and place the pump in the pond attached to a plastic hose. Run the hose up to the top of the waterfall and turn it on. Again make any adjustments. Finish placing rocks on the base of the waterfall, hiding the plastic hose by placing rocks over it. Be careful not to crimp the hose with rocks. Place rocks, edging, or bricks around the edge of the pond to hide the liner.