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Business School For Non-Business Minds: Got A Naics Number?

Apr 15, 2008
I'm a journalist. I spent a lot of my career in the news business. As my career has progressed, I've spent time at small and large companies, and I have sat through dozens of business meetings wondering what the heck the "money" people are talking about. They used acronyms as if they were a foreign language.

Now I work for a company that publishes company information, and I'm in a whole new world of acronyms. One of the biggest in this business is the NAICS, pronounced "Nakes", number.

The North American Industry Classification System (NAICS) is a series of numbers assigned to business establishments by government agencies (or themselves) that identifies the primary business of the establishment. In 1997, NAICS was established to largely replace the older Standard Industrial Classification (SIC) system.

The five- or six-digit "Nakes" replaced three-or four-digit "Siks" in order to do a better job of covering service and technology industries and to include Canada and Mexico in the classification system--thus the North America part.

Although the change from SIC to NAICS was made in 1997 and updated in 2002, both codes are still in use, and both are widely used by market researchers, securities analysts and other systems used to classify companies.

What NAICS Numbers Mean

NAICS is a two- through six-digit hierarchical classification code system--the longer the number, the more detailed the industry description.

Each digit in the code is part of a series of progressively narrower categories, and the more digits in the code signify greater classification detail. The first two digits designate the economic sector, the third digit designates the subsector, the fourth digit designates the industry group, the fifth digit designates the NAICS industry, and the sixth digit designates the national industry. A complete and valid NAICS code contains six digits.

Examples of NAICS codes:

51 Information
513 Broadcasting and telecommunications
5133 Telecommunications
51332 Wireless telecommunications carriers (except satellite)
513322 Cell phones and cell phone service

NAICS codes are assigned by establishment, not by enterprise. An establishment is a business or industrial unit at a single, physical location that produces or distributes goods or performs services (e.g., store, factory, farm, etc.). An enterprise, on the other hand, may consist of more than one location performing the same or different types of economic activities. Each establishment of that enterprise is assigned a NAICS code based on its own primary activity.

How Companies Get a NAICS Number

There is no central government agency with the role of assigning, monitoring, or approving NAICS codes. Individual establishments are assigned NAICS codes as they do business with banks, vendors and credit lenders. The U.S. Census Bureau, for instance, assigns NAICS codes to collect, tabulate, analyze, and disseminate statistical data describing the economy of the United States.

Generally, NAICS classification codes are derived from information that a business establishment has provided on administrative, survey or census reports. The fact is, as soon as you start to do business, a NAICS code will be necessary and either you'll seek it out yourself or someone will assign you one.
About the Author
Melissa Mashtonio writes for Manta.com, the authority for finding 45 million free company profiles covering large to small firms worldwide. Empowered with CRM tools, users compete smarter, accelerate sales prospecting and partnering, and identify revenue opportunities faster.
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