How to Select the Right NAICS Code for Your Business: A Guide by Business Consulting Experts
As a business owner, selecting the correct industry code is essential. The North American Industry Classification System or NAICS is used by the government to categorize businesses based on their types of economic activities. Accurately selecting the code(s) that accurately describe your business’s goods or services is crucial for market research, government funding, and other business requirements. In this blog, we will provide you with a comprehensive guide to selecting the right NAICS code based on our expertise as business consulting experts.
Why Do You Need a NAICS Code?
NAICS codes benefit organizations in a wide range of areas. Here are a few reasons why you need a NAICS code for your business:
1. Access to Government Funding
Businesses that accurately categorize their activities through NAICS codes are eligible for government funding and grants. For instance, small businesses using such codes are among the first to be notified about government funding opportunities for certain projects.
2. Market Research
NAICS codes assist businesses in identifying competitors and conducting market research. It helps businesses to examine their industry’s current status using NAICS Code lookup tools that are widely available online.
3. Business Plan Development
The NAICS code is an essential component of the business plan. It provides investors with a clear understanding of the company’s activities and the industry as a whole.
How to Choose the Right NAICS Code for Your Business
The NAICS code categorizes businesses based on their type of economic activity as a way to standardize and classify knowledge about industries in the United States. To select the appropriate code for your business, follow these guidelines:
1. Identify Your Business’s Primary Activity
Identify your company’s main activity. NAICS codes categorize firms based on production, manufacturing, distribution, and service functions. Your business’ primary activity will fall under one of these categories, and you can easily select the applicable code by studying your company’s operations.
2. Examine the Industry
Study the industry. Review the descriptions of the codes in the NAICS manual and select the most appropriate one depending on your business activity.
3. Take a Look at Your Competitors
Examine the NAICS codes employed by your competitors. Knowing the NAICS codes used by your rivals can help you identify the right code for your business.
4. Combine Several NAICS Codes
The NAICS code does not always perfectly describe your business. It is advisable to use several NAICS codes to provide a comprehensive representation of your company’s activities.
Examples of NAICS Codes
Here are some examples of NAICS codes based on industry types:
Construction Industry
• 236116 – New Multifamily Housing Construction (except For-Sale Builders)
• 237310 – Highway, Street, and Bridge Construction
Manufacturing Industry
• 311111 – Dog and Cat Food Manufacturing
• 325412 – Pharmaceutical Preparation Manufacturing
Retail Industry
• 441110 – New Car Dealers
• 452111 – Department Stores
Conclusion
In conclusion, selecting the correct NAICS code(s) for your business is essential. Failure to select the correct code may result in missed funding opportunities or incorrect market research. Following the guidelines in this article can assist you in selecting the right code for your business, and with that information, you can achieve your business goals more efficiently.
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