Feedback on Recurring Revenue deal structure

I am looking for feedback on how to structure a deal, that will initially be consulting, with opportunity to capture equity stake.

The business is a software solution sold to local governments, the space I’m most familiar with. The owner has a handful of unrelated products sold into this vertical, but it’s not a platform suite. Owner’s been at it for a long time and is looking to consolidate operations and focus full time on only two products (unrelated to what I describe below).

Owner approached me to advise and consult on opportunity, focusing on one specific product. Currently, this product only has two customers, priced with a very small monthly recurring fee plus usage based fees. Customer #1 generates $2500 per month and Customer #2 generates $5000 per month. Both have been customers for 5+ years, but neither is under an active contact, instead customers continue to issue purchase orders and pay invoices.

I offered the owner 1x annualized revenues ($90k cash) to purchase the product and customers outright; he declined the offer and to make a realistic counteroffer. Instead, Owner would like me to serve as Consultant to help develop a go to market strategy and then execute on that strategy. Compensation would include an hourly rate, plus opportunity to earn equity in this specific product tied to customer/revenue growth. The equity would be structured as ownership to include profit sharing; therefore, I would benefit either through a future acquisition or via cash flow generated.

I have no interest in purely consultant for a fee, but I am intrigued by the ownership potential. It reduces my risk up front, while allowing me to test the business potential and be rewarded via equity.

Feedback I need:

1) What’s a fair equity stake structure to take per revenue growth? Ideally, we would establish the current enterprise value of the product/customers and then I’d earn a pro-rata share for marginal enterprise value created by new customers/revenue I generate. Realistically, I need to keep it much simpler.

2) What’s a reasonable hourly rate? I haven’t consulted in years and I’m looking to fairly cover my expert time and expenses, knowing that I’m not really in this for the consulting fee. FYI, 10 years ago I consulted at $75/hour for guaranteed 10 hours/week; recently I’ve received $550/hour for 1-2 hour expert panel sessions.

3) What pitfalls could I encounter? How do I mitigate those?

Any and all feedback is welcomed, thanks!