For those with experience on either side, would love to hear pros/cons, words of wisdom, etc. on buying into an existing business by financing the equity purchase from the owner(s)/partner(s).

Bought an additional 60% stake in an accounting firm financed through the retiring partner. Got a good interest rate. Just made the last payment in May. Went from 3 owners down to 2 and worked out very well. Business is now more profitable. revenues up and now with no more monthly payment cash flow is great. My suggestion is definitely keep the annual payment amount less than 10% of gross revenue preferably 7.5% or less. Also would highly recommend both parties have attorney draw up agreement.

I would warn against future payments based on future earnings potential.
I would have very clearly defined roles for any people leaving (with company shares) or staying on temporarily.
Including what benefits they receive, etc.

I know a guy who got in a motorcycle wreck and it almost killed him. He had to sell his business, his payout was based on future earnings for 1-2 years, the buyer cooked the books to not show any profit for two years, guy selling almost went bankrupt.

Know another guy who sold his business, but was staying on to help the transition / semi-retire, but he didn't write into the contract what role he would have going forward. The new owners basically made him shop labor till he quit and he missed future payments since he quit. This was 30 years ago, so handshake deals were probably more common back then.

Additionally, I would make sure this isn't a situation where the all the sales or most of the sales are only by the owner. Many small business carve out a niche, and their customers buy from Steve (the mythical owner) cause they have known Steve for 20+ years. You may or may not get that business and you may or may not keep that business in the future. If you owe Steve 10K per month for the next 2 years, you need to insure that those sales will continue.

I have bought two businesses and sold two businesses via seller financing. In all my situations, I acquired 100% and sold 100% which is different somewhat from buying in and some of the current owners are still involved. The others on the thread have given you some good advice.

If you feel the interest rate is too high, try to negotiate that it drops to some level in the future, based on some identifiable factor (5 year CD rates, Treasury rates, etc.) but something definitive. But no upward adjustment.

One mistake I made on the first purchase is I should have had an agreement with the seller (someone I knew well) that if anything was discovered during the first three (or five) years after the date of the sale, he (the seller) was responsible for correcting it and not me. About a year after we made our deal, it was discovered one of his employees had botched up some payroll reporting for one of the larger clients. I wanted to keep them as a client due to the fees we collected from them, but it wasn't right to invoice them for our time fixing what my predecessor's people had messed up. The client had already invoiced them for the services. It was costly to me to have to deal with it.

Not sure what type of business you are considering, but take into consideration whether the current business has one or three or five customers/clients that make up a huge part of the annual revenue. If you purchase using numbers that include those of that type and they go elsewhere after your purchase, you will likely regret making the deal!