A setup should include setting the action, checking the intonation (in electric guitars), as well as anything else that may affect the playability of the instrument. Make sure that the tuners are working and not coming lose. Look for anything that might need tightening - strap buttons, knobs, pots, jacks, etc. It only takes a minute to do this, and during a setup, you have the chance to really look closely at these things. Before any adjustments are made to the action, make notes on the current action. Measure string height at the first fret, 5th fret, and 12th fret. This will give you an idea of how much adjusting will be needed. Sometimes you can improve an instrument, yet wont be able to get it perfect without major work. A setup will put a guitar in good playing condition when all the systems are in good shape an only need adjustment.
While you can make the adjustments with old strings, the measurements may change when the strings are replaced, so always start with new strings that are of the brand, type, and gauge that the player likes. Make sure the gauge of the string is compatible with the instrument. Some instruments cannot take high tension strings. Never use a string that will cause damage to the instrument. Remove the old strings, clean the fingerboard, and check the tuners (no better time to do this). Now is also a good time to clean the instrument. Cleaning an instrument is a good way to inspect it. Look for hidden problems like bridges coming up, cracks, neck joint separation, etc. If you know you will need to adjust the truss rod, do it now.
After the new strings are on, the check the action. The height of the strings above the frets is critical to a player. There are three points main adjustments in setting the action. The height of the strings at the nut, the relief in the fingerboard, and the height of the strings at the bridge. If one of these is off, it is impossible to set the action with just the other two. Some guitars have bolt-on necks and then neck alignment can be an adjustment issue as well. Frequently, I will find guitars that have the correct string height in the middle of the fingerboard, but because the nut is too high or the relief is too flat, the instrument buzzes severely. I have found that the order of adjustments makes a difference in the ease and accuracy of the end result.
The first step is to check the neck relief. This is the slight forward bow in the neck that allows the notes to ring clear in the lower frets. This is done by holding the 6th string down at the first fret and at the fret where the neck joins the body. Look at the height of the string above the 7th fret. There should be a gap of less than 1/64". If the gap is larger than this, then you will need to tighten the truss rod. To increase the gap, loosen the truss rod. For details on truss rod adjustments, read this page. You should also check the relief on the first string. It should be the same as on the 6th. If there is a significant difference, the neck could be twisted. If this is the case, then take it to someone experienced in this type of repair (Severe cases may require a new neck). Use caution with adjusting the truss rod nut. Use only a tool that fits (Stewart Macdonald's carries a wide assortment of tools for setups ). Over-tightening the truss rod can severely damage or even completely ruin a neck. Leaving completely loose can cause rattling inside the neck.
After the relief is set, then check the height of the strings at the nut. This is done by measuring the height of the 6th string above the first fret. There should also be about 1/64" gap. If you press the string down at the first fret and look at the height at the second fret, that should be about the gap at the first fret with the string open. If it is less than that, the string will buzz. Use nut files to cut the slots to the correct height. Measure the current string height. If it is 2/64" or more, then you need to cut about 1/64" of material away. There are nut files in just about every guage, but three will do the job. One for the high E, G, and A strings. You rock the file from side to side as you cut the next larger string slot. The files cut fast, so do only a few strokes and then re-measure. Your rate of progress will tell you how hard the nut material is. Some materials will cut much faster than others. If you cut too deeply, do not despair. Fill the slot with a small drop of superglue and sprinkle a small bit bone dust on the glue. Some folks add baking soda to the powder to make it set faster. Do not breathe the fumes that will come off of this. Once it has set hard, it can be re-cut.
When the nut height is good for each string, then set the height of the strings at the bridge. This adjustment will vary for each individual player. If the saddle pieces have individual height adjustments, make sure that the radius of the saddle matches the radius of the fingerboard. Then take measurements at the 5th fret and at the 12th fret. On electric's I adjust the height of the 6th string to 3/64ths" at the 5th fret and 4/64ths" at the 12th fret. The first string is set 1/64th" lower at both positions. For acoustic guitars, I set the height slightly higher (up to 1/64th") on both strings (see the page on carving saddles coming soon). At this height you should be able to play without any buzz. Some players prefer a slightly lower action and will accept some buzzing. Other players play very hard or use a slide and prefer a slightly higher action.
After the action is set, check the rest of the guitar for playability. If you have a guitar with adjustable saddles, check the intonation. Use a good tuner for this. Tune the instrument to pitch. The note at the 12th fret of each string should be exactly one octave higher that the string open If the note at the 12th fret is sharp, then move the saddle away from the neck. If the note at the 12th fret is flat, move the saddle closer.
One last thing to do is to check for loose strap buttons. These only take a minute to fix and can prevent disaster. If the screw won't tighten, remove it , insert a tooth pick in the hole and replace the screw.