For Nate, I pretty much just sewed and cut to make the shirt more his size. I turned it inside out and put it on him (well, actually Nora, because he wouldn't sit still long enough to let me see how much to take in, let alone pin it). I pinned the top of the sleeves starting from the collar and working down to the end of the sleeve. (I could have used more pins, but I also needed to take it off a toddler to insisted on doing it herself, so two was good enough!)
I made sure the collar edges lined up and the end of the sleeves lined up, then sewed straight across using a jersey needle and matching thread. This brought the neckline up and kept it from hanging off his shoulders.
Then I put it on him inside out again to try to figure out how much to take the sides in. The problem I ran into was that if I made it small enough to pit him properly, the beginning and end of the company name on the back and the end of if on the front would be cut off. So, instead of trying to wrestle a toddler who'd rather be sliding in the closet, I just took it off and free handed it. While it was still inside out, I measured in from each armpit into where the letters were, then left about a 1/4" extra space. I believe it was about 1 1/2" for this particular t-shirt. Then I measured in from the bottom 1 1/2" and sewed straight up until the armpit, at which point, I set my needle down, picked up the foot of my sewing machine, and turned the t-shirt so I could sew straight to the armpit. I did the same to the other side then flipped it right side out and had him try it on. It fit him, but it looked like I had tried some ruching in the armpit and side area since I hadn't yet cut off the extra material. Once I decided that it fit him and I didn't make it too small, I took it off him, flipped it inside out again, and cut off the extra fabric.
When I had him try it on again, it looked much better, but the sleeves were still pretty big, so I figured out how much smaller I needed to make the arm holes the same way I did the top collar and arm part, and sewed it. The sleeves were still pretty long though, so I decided to just cut them off right inside the actual seam where the sleeve is attached to the body of the t-shirt. Since I was working with jersey knit material, I didn't have to worry about hemming it, which made my life much easier!
Now it was starting to fit him better, but it was still the length of a dress, so I figured out how much I needed to cut off the bottom to bring it up just below his waist. I took my rotary cutter (okay, so it's the one I'm borrowing from my mom for another project), and sliced it off. If you don't have a rotary cutter (like normal for me!), you can use a yard stick or straight edge to draw a line and a scissors to cut. Just make sure that when you are cutting and measuring that the bottom edges of your t-shirt are lined up. And, again, I didn't have to worry about hemming it since I'm working with t-shirt material.
I was originally going to have her just wear a belt with it, but since I had so much leftover material, I figured, why not make a matching belt? So I used the bottom part of Nate's shirt and cut off a 1" wide strip using my rotary cutter. Since there's no seams, I just cut the circle of fabric at a random point so I had a long "rope" where I could pull both ends to make the edges curl in.
I even managed to put little belt loops on her dress so it would stay in place. I cut off about an inch of a seam and zigzag stitched it onto the sides of her dress. You're going to want to go back and forth several times to make sure it stays attached. One of the sides of Nora's came off at the walk.
The final touch was adding a cute little flower to her dress. I used this basic Twisted Petal Flower tutorial as my starting point, and I put it on the upper right side of her dress.
At the walk we got many compliments on Nora's dress and the ruching on my t-shirt. We also got a couple questions on how we got a t-shirt to fit Nate from parents of other toddlers. Hopefully we'll have another company event to wear them to before the kids outgrow their t-shirts!