The North American Industry Classification System is the standard numerical coding system used by federal agencies so that all industries and sub-industries can be easily identifiable by a string of numbers up to six digits long. Generally, the first two or three digits of the NAICS code indicate the overall industry in which the company operates, and the last two or three digits narrow down the company's business activities. For example, furniture and fixture stores' NAICS codes begin with the digits 442. Furniture retailers are further classified as 4421, while home-furnishings retailers are assigned 4422. Home-furnishing retailers that sell only floor coverings are assigned the number 44221.
Purpose of NAICS Codes
The NAICS system was developed by the Office of Management and Budget to more effectively collect and analyze data on domestic businesses. Data providers such as Dun & Bradstreet and the Risk Management Association publish financial benchmark statistics based on NAICS codes. These can be extremely useful tools you can use as guidelines for preparing your own company's budget projections. You can also use benchmark data for estimating fair market compensation figures and assessing your company's financial performance relative to competitors and peers.
Finding the NAICS code
Many government agencies such as the Census Bureau and the Bureau of Labor Statistics (see Resources), maintain databases of NAICS categories that include detailed descriptions of what type of companies fall within each NAICS code. You can also refer to print or online publications of data providers such as the Risk Management Association's Annual Statement Studies. Enter in keywords to continually narrow down your search until you arrive at the most appropriate NAICS code. You can also perform these word searches using search engines such as Google.
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