I like to remove the clutch retaining bolt so the clutch will very easily side back and forth on the engines output shaft.
Then elevate the back wheels up off the ground and spin the axle while watching where the chain positions the clutch on the shaft.
Then simply adjust the sprocket over as necessary until spinning the axle perfectly positions the clutch into its normal location.
The cool thing about this method is it will help compensate for any imperfect alignment issues you may have between your engine and axle, and end up much better than simply lining up the sprockets using any other method.
If your axle or engine is slightly crooked, you may not want the sprockets perfectly lined up...
I suggest you also loosen you motor mount bolts to see if slightly twisting the engine helps to better position the clutch while your using this method. You could do this same thing with your axle if you really want to do the the best possible job...
The engine (and axle-bearing) mounting holes are usualy a little larger than the bolts and most people never even check to make sure everything is tightened down in the position that's closest to having the engine perfectly square to the axle. That's very important and can make the difference between a chain that stays on or not!
Obviously your chain and sprockets must be in very good condition for this method to be as accurate as possible.