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In this video tutorial, viewers learn how to properly set up business letters in 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, where the top margin can be set to 2 inches by typing it in directly for efficiency. After adjusting the margin, the tutorial suggests changing the font style, size, and spacing options, preparing viewers for the next steps in formatting their letters.