Measure out the dimensions of your shed on level ground.
Place a wooden peg at each corner of the measured area.
Run a string from each peg to the next. Make sure the string is taunt.
Dig out the inside of the marked-off area to a depth of about 3 inches.
Rake the inside of the foundation area to make it as level as possible.
Lay down your plastic tarp inside the marked-off area. Keep the tarp as level as possible, and make sure it covers the entire area. While this step is optional, the tarp will help prevent the gravel from sinking into the ground, make it difficult for weeds and grass to grow up through your foundation, and help keep out moisture.
Lay down your gravel.
Rake the gravel until it is even with the edge of your pit.