SME Focus: All those SMEs that have managed to update their prices will be hoping that Alistair Darling�s decision to cut the standard Value Added Tax rate from 17.5% to 15% will provide some encouragement, however limited, to shoppers to part with their cash.

All those SMEs that have managed to update their prices will be hoping that Alistair Darling's decision to cut the standard Value Added Tax rate from 17.5% to 15% will provide some encouragement, however limited, to shoppers to part with their cash. The prospect that the Bank of England will slash the base interest rate again on Thursday, from 3%, may also leave at least some feeling a little more optimistic than they did this time last week. But amid all the gloom, many firms are getting on with the business of trying to maximise their share of whatever money consumers are prepared to spend. In this week's SME Focus, two coffee nuts from overseas explain how by being adaptable they have managed to muscle into a patch that is dominated by big names and win recognition in some very chic places.

Name: Gustavo Pardo and Michael Wilson

Age: 56 and 31

What is your business called? Artisan Roast Ltd

Where is it based? In the Broughton area of Edinburgh

What does it produce, what services does it offer? We produce premium fresh-roasted speciality coffees. We supply espresso to cafes and restaurants and train baristas to produce what we think are great coffees. Our centre of operations is in a small coffee shop and roastery in 57 Broughton Street where customers can buy freshly roasted gourmet beans from places like Ethiopia, Kenya, Colombia and India. Originally we thought of it as a retail shop but a growing flow of people wanting to stay there for a while and have a coffee convinced us to transform it into a cafe.

To whom does it sell? The Cafe sells mostly to foodies, who have a passion for food and include coffee as one of their essential foodstuffs. We are now selling to over thirty cafes across Scotland and providing advice on cafe location, staffing issues, equipment selection and design of the espresso bar.

What is its turnover? Five figures.

How many employees? Four

When was it formed? August 2007

Why did you take the plunge? Gustavo: I'm passionate about helping people to become more entrepreneurial. In the early 90s I participated with a group of friends in the creation of a foundation devoted to helping underprivileged people in Chile to develop entrepreneurial skills. Considering that today to be successful you have to think global, I decided to leave Chile and work with truly global businesses. After working for many years as a change management consultant for big international corporations, I decided to look into the other end of the spectrum and start my own SME. I'm confident our work at Artisan Roast will soon be a vehicle for me to start doing that work again with coffee farmers in poor countries.
Michael: I was running out of savings and had to start working.

What were you doing before you took the plunge? Gustavo: I am from Chile. I worked for more than 10 years as a change management consultant for international corporations. That took me to work and live in places like Germany, Mexico, Switzerland, the US and finally the UK. My last employer was Deloitte & Touche where I worked as a Senior Manager for Strategy Consulting in the financial sector.
Michael: I studied genetics and Chinese language at university in New Zealand then put on rock concerts in Syria for a year-and-a-half and raising money for SOS Children's Villages there. I spent four years in the Royal Engineers. After leaving the British Army I wanted to work in the charity sector, but was disillusioned with the way most seemed to me to be inefficient and too broad in scope to be effectual. I came to Edinburgh three years ago to learn about business from my mate, David Mackman of Scottish Apartment, and start my own youth-based charity. I am director of Catalyst Entrepreneurial Charity bringing C Project, a youth development programme, to Scottish Schools.

How did you raise the start-up funding? We are self-funded. We kept our start-up costs to an absolute minimum, doing most of the work ourselves, eschewing most advisers and marketing and spending lavishly only on ensuring the quality of our product.

What was your biggest break? We are a small specialist coffee roastery that until now has delivered our coffee by bicycle. Fiona Hamilton, director of Fifi and Ally (the Glasgow-based boutique cafe group), recently took a great risk by moving from Illy, a well-marketed international supplier to a small and young business because she recognised the increase in quality that we could provide.

What was your worst moment? In November 2007, we were sat in the bean shop wondering what we could do to get the business to start making money. We were breaking even but couldn't pay ourselves or retrieve our initial investment. Gustavo had left a well-paid and secure job and was wondering whether he'd made a mistake. We sold honey, chocolate, coffee beans and coffees and the figures told us that it was only the espresso coffee that brought in our income. We decided to convert the storeroom at the back into a Moroccan-style sitting room and reduce our stocks of honey and chocolate.We waited till after Christmas to sell most of our stock and spent most nights in January converting the back into cafe seating. We opened the Mooch' in February and our coffee sales have increased month on month since then. Coincidentally, it was in February that many cafes and restaurants approached us to supply them too. So many, in fact, that we wouldn't mind our storeroom back. What do you most enjoy about running the business? The cafe is a fun place to work. Our staff are all passionate about coffee and fun to work with and our customers tend to be really interesting, intelligent people. The downside is that it's really easy to get distracted from work and it means we spend more time there than is good for us.

What do you least enjoy? Accounting. Working in the coffee business makes it impossible to enjoy a coffee in all but a few cafes.

What are your ambitions for the firm? Our mission is to improve the quality of coffee of Europe starting with Scotland. It would be great to one day have a roastery in Rome to show the Italians how good coffee can be. We would like it to grow large enough to be able to support more C Project programmes and also to work directly with coffee farmers helping them to improve their quality of life and their entrepreneurial skills.

What are your five top priorities? Our staff; service to customers; coffee quality; coffee education and training; sound business management.

What single thing would most help?

The single thing that did most help was our advisor at Business Gateway. Mr Al Jaberu put us through our paces with our business plan and pointed us in the right direction for pertinent advice on accountancy, tax issues and locating property.

What could the Westminster and/or Scottish governments do that would help? Reform the bloated tax system and introduce simplicity. We are happy to pay our dues, but resent the time and inefficiency of the current system. It is ridiculous that in Scotland, even if you have a small business like ours, you have to pay an accountant to do your year-end accounts and to keep up with all the changes to the tax system.

What were the most valuable lessons that you learned? First learn from your customers and then invest in what they want. This year we've seen many new businesses making a huge investment before being sure the customer wants their products. Customers want what they want and not necessarily what you think, or would like them to want. Listen, listen, listen and then invest. Second, manage your business, even if it's small, as if it would be big. Keep all the relevant information at hand and easy to access, make informed decisions even for small things. Use technology to keep things clear and manageable. That's the only way in which you will be able to grow fast when you need to. Third, pay attention to the figures on the balance sheet. We thought that honey and chocolate were selling well, because they were physically there to be counted. However, it was the ephemeral coffee from barista to the inside of our customers that was really selling.

How do you relax? Embracing Argentine Tango, indeed, it's where we met. We are both active members of the Edinburgh Tango Society and a few good business ideas have been discussed first time between dances.

• In an audio interview with The Herald, Michael Wilson and Gustavo Pardo explain why they decided to go for broke in Scotland and offer practical advice on how to get a successful cafe going www.theherald.co.uk