I agree, I think it just depends on what the investor or entrepreneur ultimately desires. Sure you can generate a higher return if you continue to buy and sell businesses. That's why the PE fund structure is attractive. But it's a much smaller payday if you're only getting 3-5x. While the numbers may tell you to go continue buying and selling, I think it is much more difficult to do in practice (finding a quality, cash flowing business isn't easy). If you're in your late twenties or early thirties and own a business you believe in that has recurring revenue and is cash flowing, some folks may find it difficult to want to sell at such a low multiple. Rather, they may prefer to use that cash flow to go buy another business utilizing an SBA loan (for example) without the pressure of needing to quickly find the next business to flip.

I think we can both agree that permanent equity is difficult to institutionalize. But interesting food for thought.

Dylan - I've been investigating this in Houston and have come across a f ew people following, essentially, the same structure. I wouldn't say they've institutionalized their approach, but they're making it work in a more tailored, customer approach. Reach out if you'd like to discuss.