With the management fee style of construction, the question for the contractor is: what is reasonable and fair rate to charge as a percentage of costs to build the home?
A business concept whereby emphasis is made on making sales to offset fixed costs. This concept is generally applicable in high fixed costs industries such as hospitality and technology. Since each sale has little marginal or variable cost, the sale generates absolute cash to offset fixed costs. Read: Absolute Dollars for a clearer understanding of this basic business principle.
In the hospitality industry, there is one financial tenet that takes precedence over any other business perspective. In this industry, it is about putting the maximum number of dollars (ABSOLUTE DOLLARS) in the register after each day. One of the most misunderstood business dynamics of this industry is the higher than average fixed cost to run the company.