Dig out any nongrass plantings, such as saplings or small bushes, with a round point shovel. Post Woodworking, Inc. relates that it is not necessary to remove grass from the shed area as it will naturally die back once the shed deprives the grass of sun.
Extend the 2-by-4-inch wood stud across the shed area and place a level on top.
Check the level of the area by starting at one width end and moving the 2-by-4-inch wood stud across the area until you reach the other end. Check how well the ground is level along the way, about every 6 inches or so.
Check the level at one length end of the area and move the stud across the area until you reach the other end. Check the level at each point along the way, also about every 6 inches or so.
Dig up dirt with a garden spade from any high points in the area and place the same dirt onto the area's low points. Check the level each time you shift the dirt around to verify that you are getting the area closer to being level.
Compact the dirt by stomping and walking on it several times.
Smooth the dirt by shifting the 2-by-4-inch wood stud back and forth across the area.
Check the level again across the width and length of the shed area to confirm that it is now level. Once the ground is level, wait 24 hours to allow the dirt time to settle. Walk over the area again the next day to compact the dirt even more before beginning the process of installing your new shed.