Instructions
Open Steam. Click "Library" and select "Tools" in the drop-down menu.
Double-click "Source SDK" from the list. Select "Source Engine 2009" from the drop-down menu, and then double-click "Hammer". Wait for the program to load.
Click "Tools" and "Options", followed by "Edit" and "Add".
Change the following options as listed, leaving the rest of the options in their default state:
Name: Garry's Mod
TF2: garrysmod/garrysmod
Game Executable Directory: $SteamUserDir/garrysmod
Game Directory: $SteamUserDir/garrysmod/garrysmod
Hammer VMF Directory: $SteamUserDir/garrysmod/garrysmod/maps/vmf
Place Compiled Maps: $SteamUserDir/garrysmod/garrysmod/maps
Click "Save".