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In this video tutorial, viewers learn how to properly set up business letters using Microsoft Word. The first step is to adjust the top margin from 1 inch to 2 inches. This is done by going to the page layout, selecting margins, and clicking on custom margins to input the new measurement. Once the top margin is set, the cursor automatically moves down to reflect the change. The tutorial emphasizes the importance of modifying font style, size, and spacing options before proceeding with the letter's content.