Inspired by a micro-distilling boom in the US, two old school friends came back to Britain to launch Sipsmith, where they produce hand-crafted spirits with more than a little help from Prudence

Sam Galsworthy The business started because Fairfax and I, having grown up as mates, both ended up in the drinks industry. We were working in the US in the late 1990s and noticed this boom in small, local distilleries.

Fairfax Hall Sam's parents and mine are great friends and we went to school together. After school we went separate ways, but stayed in touch. It was coincidence that Sam went to the US with Fullers and I went to do an MBA at Wharton. Sam was based in New York and we saw each other quite a bit. I was on my way to Diageo and he was already in the industry. That's when we saw this stuff with micro-distilleries happening.

SG I was fascinated that these small distilleries were producing tiny quantities, often by hand, and their products seemed to taste better than mass-produced spirits. They also resonated with local consumers, who became evangelical and would talk up the spirits. They couldn't afford above-the-line marketing, but they had so much local support they didn't need it.

FH This was in the days of globalisation and bigger is better. Big drinks firms were swallowing up all the smaller ones and becoming the behemoths they are today. There was a reaction against that—to small is beautiful, and the importance of the local. The main thing is that when you make something by hand you make a product that is better and that delivers phenomenal quality.

SG Fairfax and I came back to London and decided to create a hand-crafted London dry gin. We persuaded the government to give us a distiller's licence, which wasn't easy. It was the first one granted in London for about 200 years and no one knew what was involved. Once they saw we were serious they gave us the licence, but it took two years.

FH We didn't want to raise the capital, which involved us moving to release equity to kick us off, until we had the licence in place. But no one was familiar with the process because it hadn't been done for so long. They wanted to know we had credibility and importantly, they wanted to know we had finance in place. In the end we got an approval in principle to reduce risk to an acceptable level.

SG We knew we wanted to make a classic London dry gin, but we also wanted to try a hand-crafted vodka. We wanted a copper-pot still and knew the company we wanted to make it. We call our still Prudence and she is the heart of the business. We are making products for discerning drinkers, not peacock drinkers.

FH Finding the site was also a challenge. We wanted to be at the heart of a community, accessible by Tube. Finding the right-sized space with the relevant licences in an area that is primarily residential was difficult.

SG The biggest challenge we face is keeping on top of working capital and making sure that we don't over-expand or get too carried away. The drinks industry is full of brands that have expanded globally and spread themselves too thinly, too quickly.

FH We've done things the hard way. The easy option would be to not have a distillery and just get someone else to make [the drinks]. You come up with a brand concept, make a label and stick it on a bottle and off you go. But it would be a homeless brand. We've given our brand a home and where better than London-original home of London dry gin?

SG Fairfax handles the finance and operations and I do most of the marketing and sales, although we both do some of that. I bring home the bacon and Fairfax cures it. We also have a master distiller, a production distiller and one sales person, so we're a very happy family of five—or six, if you include Prudence.

FH Sam is a genius at sales and goes out there and gets the business and grows things. My role is to make sure the finance and operational side of the business is sorted.

SG When we looked for funding a lot of people were keen to help on the basis that Grey Goose vodka was sold for £1bn. But I haven't got my head round the exit yet. It's important to get out of a business when it's lost its excitement, but I can't see that at the moment.

FH If everything keeps growing, we will need another, larger still and we'd look to get more staff. It is scaleable, but you have to buy more equipment and get more people. The key for us is to grow without compromising product quality and production methodology.