Entrepreneurs and business owners are likely familiar with NAICS codes. What are they, though, and how do you utilize and read them? A standardized system for classifying firms and industries in Canada, Mexico, and the United States is called NAICS, or North American Industry Classification System. We’ll go over how to understand an NAICS code and apply it to your business in this article.
An industry or business sector is represented by a six-digit designation called an NAICS code. The sector is represented by the first two digits of the code, the subsector by the third, the industry group by the fourth, and the individual industry by the fifth and sixth. Agricultural services are denoted by the number 11XXX, while professional, scientific, and technological services are denoted by the code 541. How to Interpret an NAICS Code You must comprehend an NAICS code’s structure in order to read it. The sector, which is the most general level of classification, is represented by the first two digits. There are a total of 20 sectors, from finance and insurance to agriculture. The subsector, a more specific classification within the sector, is represented by the third digit. There are a total of 99 subsectors. The industry group, which is a further segmentation of the subsector, is represented by the fourth digit. In total, there are 312 industry groups. The specific industry is represented by the fifth and sixth numbers, which is the most in-depth degree of classification. In total, there are more than a thousand distinct industries. Useful Information About NAICS Codes Market research, data analysis, and government reporting are just a few of the uses for NAICS numbers. Here are a few applications for an NAICS code in business:
2. Data Analysis: You can utilize NAICS codes to examine data that is specific to a given industry, like employment trends and revenue growth. This might assist you in making defensible choices regarding your corporate strategy.
3. Government Reporting: When requesting permits or licenses, many government organizations ask enterprises to submit their NAICS codes. You may make sure that your company is in compliance with requirements by utilizing the appropriate NAICS code.
The NAICS codes are a valuable resource for business owners and entrepreneurs, to sum up. You can acquire important insights into your sector and make wise judgments about your business strategy by learning how to interpret and use these codes.