Seems odd the previous owner accepted such a low monthly payment. I guess it required a lot of work? Or perhaps the owner felt the downside risk was substantially higher than it appears?
He got to keep 20%, and the new owners were much more interested in putting in the work for growing the business than he was.
20% of a business that's now more than 5 times the value it was when he sold 80% of it, plus $400k cash, and not having to work on it at all anymore can be a pretty good deal on it's own...
The equity piece is the key. If you sold for a lump sum you're all out and happy. But I imagine if you sell for a monthly payment, you're still emotionally attached.
Would suck to check on how the business is going and regret your decision to sell for a monthly payment with no equity.
It does depend how unscrupulous the buyer is... you may end up being cheated out of your equity.
That said, I like the cash-equity split without the condition of working on the project further yourself. It gives an incentive for the seller to not disappear/become uncontactable...
