Microsoft 365 Fundamentals for Small Businesses: Your Essential Setup Checklist

Are you the admin of a small to medium-sized business, managing between 25 and 75 users? Whether you're setting up a fresh Microsoft 365 tenant or taking over an existing one, getting the fundamentals right from day one is key to ensuring security, productivity, and long-term success.

This guide walks you through the most important initial steps to configure, secure, and optimise your Microsoft 365 environment.

1. Define Your Admin Roles

Don’t rely on a single Global Administrator account. Assign roles based on responsibilities using Entra ID (formerly Azure AD) roles:

• Global Admin (minimum 2 accounts - one as break-glass)

• Exchange Admin (email)

• SharePoint Admin (file sharing/intranet)

• Teams Admin (chat and collaboration)

• Compliance & Security Admin (sensitive data & policies)

Use Privileged Identity Management (PIM) to enforce time-bound, approval-based access to these roles (this requires an EntraID P2 licence).

2. Secure Your Environment with MFA from Day One

Enable Multi-Factor Authentication (MFA) for all users - especially admins. Use Conditional Access policies to enforce MFA while allowing exclusions for trusted break-glass accounts. Don't forget to:

• Require MFA for guest accounts

• Use modern authentication (disable legacy auth)

• Register MFA methods via Security Info Registration

3. Create a “Break Glass” Emergency Account

This account is essential in case your Conditional Access policies or MFA configuration lock out all admins.

• Assign Global Admin role

• Do not apply Conditional Access or MFA policies to it

• Monitor it via sign-in alerts to detect misuse

• Store credentials securely offline

4. Set Up Key Security Policies

Use Microsoft Defender for Office 365 and Entra Conditional Access to enforce a secure baseline. Priorities include:

• Anti-phishing and anti-malware policies

• Safe Links & Safe Attachments

• Conditional Access: block legacy auth, enforce MFA, location-based rules

• Password protection & expiry policies

5. Configure Core Identity Settings

Before onboarding users, configure:

• Company branding in Entra ID

• Self-service password reset

• User naming conventions

• User provisioning automation (e.g., using Power Automate or a third-party HR sync)

6. Onboard Users with Templates

Use group-based licensing and role-based templates to onboard staff consistently:

• Assign licences using dynamic security groups

• Pre-configure mailbox, OneDrive, and Teams settings

• Add users to relevant Microsoft 365 Groups, Teams, and SharePoint sites automatically

7. Train Your Users on Security Basics

Security isn’t just a tech issue—it’s a human one. Deliver training on:

• Phishing awareness and email safety

• Recognising social engineering

• Reporting suspicious activityLeverage Microsoft’s built-in Attack Simulation Training if available, or use a third-party provider.

8. Deploy Device and App Management

If users access data from personal or mobile devices, implement Microsoft Intune:

• Enforce app protection policies for BYOD

• Require compliant devices for access

• Enforce PIN, encryption, and remote wipe on company devices

• Block outdated OS versions or jailbroken/rooted devices

9. Protect Your Data with Backup and Recovery

Microsoft 365 has limited native backup features. Use a third-party backup solution to protect:

• Exchange mailboxes

• SharePoint and OneDrive files

• Teams chat and channel dataAlso configure Retention Policies to comply with data lifecycle requirements.

10. Encourage Collaboration – the Right Way

Deploy tools like:

• Microsoft Teams for communication and meetings

• SharePoint Online for document management

• Loop and Planner for task and project managementBut also train staff how to use them properly to avoid file sprawl and content duplication.

11. Conduct Regular Health Checks and Audits

Use:

• Microsoft Secure Score to track and improve your security posture

• Compliance Score for GDPR and regulatory readiness

• Sign-in logs and audit logs to identify anomaliesSchedule monthly reviews of licence usage, storage consumption, and admin activity.

12. Set Up Reporting and Alerts

Create reports and alerts to monitor:

• Suspicious login attempts

• Inactive or stale accounts

• Licence assignment issues

• Failed email deliveriesUse Microsoft Purview, Audit Logs, and Alert Policies to stay informed.

13. Keep Your Team Skilled

Invest in training for both your IT staff and end users:

• Use Microsoft Learn, YouTube (like our channel!), and vendor training

• Enrol admins in role-based certifications like SC-900, SC-300, MS-102, or MD-102

• Offer user-specific training tailored to apps they actually use (Outlook, Teams, Excel, etc.)

14. Plan for Growth and Change

As your business evolves:

• Review whether your licensing (e.g., Business Standard vs Premium) still fits

• Prepare for mergers, offboarding, or compliance changes

• Consider hybrid scenarios if using on-prem file servers or Active Directory

15. Document Everything

Finally, don’t let knowledge live only in your head. Create documentation for:

• User provisioning and offboarding

• Admin roles and responsibilities

• Security and compliance settings

• Licence assignment processesThis makes onboarding new admins or auditors easier and ensures business continuity.

Wrapping Up

Starting with a solid Microsoft 365 foundation pays dividends in productivity, security, and peace of mind. As a small business admin, you’re wearing many hats—but with this checklist in hand, you can confidently manage your cloud environment like a pro.

For more hands-on walkthroughs, admin tips, and demo videos, subscribe to our YouTube channel and explore other resources at smallbusinessadmin.com.