WebJunction - Business Classifications

Overview

2010-02-22T02:01:13Z

In our economic system, every business is part of a larger industry group, and every business holds or conducts one or more lines of business. Industry groups and lines of business are identified by NAICS or SIC numbers, or "codes," as many call them. Each code represents a specific industry or line of business. Economic agencies of the government use these numbers to collect, organize and publish data and analysis; researchers use these numbers to study changes and trends in business industries; and entreprenuers use them to clarify their own business operations (to get a clear sense of where their business "fits" in the bigger economic picture), to find information about their and other markets, and to navigate and mine information products like databases, print/online business directories, and economic websites. Knowing about NAICS and SIC numbers is perhaps one of the most important things a librarian can help an entrepreneur or researcher know about business information.

Guides to Resources

Important things to Know about NAICS & SIC

2010-01-29T22:14:40Z

Listed here are key issues to keep in mind when working with NAICS and SIC.

Important things to know:

All Other Services. This is basically a catch-all for industries that are in an industry group but which have no specific number for their precise activity. These are often referred to as "All Other [Name] Services" or "Other [Name] Services." Examples include 812199 for Other Personal Care Services, including hair replacement, tanning salons, etc.; 541519 for Other Computer Related Services, including custom programming, computer system integration design, and data processing facilities management services. There are MANY more examples. These are just a few to indicate that not every line of business has its own number for a very precise business and that in some cases, the number used may be a broad, catch-all number.
The dropping zero. If a number has a zero at the end, the NAICS system will drop the zero, resulting in a 5-digit number. When you see a NAICS number that is five digits, just add zero to get the complete number.
Root building. Notice how the numbers build. They start with a root. Roots are 2-digit numbers, like 61 for Educational Services, 44 for Retail Trade, and 71 for Arts, Entertainment, and Recreation, to name but a few. As additional numbers are added to the root, the number becomes more specific for the line of business within that area. 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. Notice how added numbers indicate a more specific slice of an industry in this Example of Root building:
- Root for Manufacturing: 3
- 33 is in the area of Metal Manufacturing
- 336 is Transportation Equipment Manufacturing
- 3361 is Motor Vehicle Manufacturing
- 33611 is Automobile and Light Duty Motor Vehicle Manufacturing
- 336111 is Automobile Manufacturing while 336112 is Light Truck and Utility Vehicle Manufacturing

By the way, there's no "logical" way an SIC number relates to a NAICS number. The principle of base numbers for industry groups and roots being expanded is the same, but the actual numbers used are different. SIC coverage of the Automobile Manufacturing industry runs as follows:

37 Transportation Equipment
3711 Includes: Motor Vehicles and Passenger Car Bodies
Automobiles
Light Truck and Utility Vehicles
Heavy Duty Trucks
Kit Car and Other Passenger Car Bodies
Military Armored Vehicles

You can see how little room there is for specificity, as well as how little SIC numbers break down.

A few last important things to know:

Businesses can have more than one NAICS/SIC code! Think of a department store, which sells tires, shoes, and has a beauty salon, all under the same business name! This is important to know because when thinking of competitors for a business plan, it's not just the obvious competitors that could or should be included in a market study. Even though some businesses are not obvious competitors, they are competitors, nonetheless! This is also useful when the business being formed (your customer) is planning on doing more than one major activity. For instance, they may want to sell or distribute advertising specialties, but also manufacture them. They should find both numbers that apply.
The NAICS/SIC codes are for the PRIMARY line(s) of business. If the business does one thing primarily, and other things to a much lesser degree, they probably don't need to know those lesser numbers, unless researching those specific segments when finding articles about improving that area of their business. Therefore, if a pet grooming salon also boarded pets occasionally, only the pet grooming would apply; if they do both equally or significantly, both NAICS numbers apply (which are the same in this case). However, if the grooming salon also sold pet supplies as a significant aspect of their business, they would use 812910 for pet grooming, and 453910 for pet and pet supplies stores.
Learn more about NAICS by viewing the main NAICS page online. You may also wish to consult the Ask Dr. Naics FAQ that can help you understand the system or have some of your more in-depth questions answered, over and above what was intended for librarians on this module page.
Also view and use the 2002 NAICS Code and Titles and NAICS/SIC Correspondence Tables to see how numbers are constructed and how they break out into industries. Try selecting and following various industries to get an idea how the economy is categorized under this system.

Conclusion on NAICS and SIC

Finding and Understanding NAICS/SIC

2010-01-29T22:13:32Z

Walks users through the NAICS finding process using a dog grooming business as an example

NAICS and SIC manuals have been published by the Executive Office of the President, Office of Management and Budget. Most library collections hold these manuals, particularly Federal Depository Libraries. The books feature descriptions of the major industry groups and specific industry divisions, an alphabetical index, and a bridge or matching guide between the revision and its predecessor (NAICS to SIC, NAICS 2002 to 1997, and so on). However, the quickest, easiest, and most convenient place to remotely find NAICS/SIC numbers is on the Census webpage.

NAICS Lookup: Visit www.census.gov. Look in the center of the page under the heading Business & Industry for NAICS. Once this is clicked, look in the upper left part of the page. This is the NAICS lookup area (the box where it says NAICS search).
Enter a word or words of the industry number being searched.

Exercise: This exercise will help you learn, through trial and error, how a NAICS lookup is conducted and how to understand the information given.

Your customer is seeking the NAICS and SIC number for the dog grooming industry. Enter "dog grooming" in the search box.
You'll see a message that indicates no listing for the industry you entered.
Now, try "dog." (You can use the box provided on the page you received; i.e., you don't have to return to the previous page.)
You get a result this time, but none reflects the industry you're seeking. This time, try "grooming." (Again, you can use search box on the page you received.)
You see that the resulting table indicates that the NAICS number for this industry is 812910, for "pet grooming services."
You might also try "pet" just to see that a different list of industries appears, including other pet business activities, petroleum and petrochemical business activities, and others. Always scan the table for most appropriate match.

Things to notice about the results page:

Click the NAICS number (a live link) and you'll receive a definition of the industry. Notice that the table includes the SIC number for this industry, as well (0752, in this case). Look at the description and make sure it really fits what your customer is looking for.
Notice the other types of businesses that can fall within one NAICS code! In the case of pet grooming, other business types covered by 812910 include dog pounds, pet sitting, and pet training. This is VERY IMPORTANT to know when analyzing financial data for a business plan (from statement studies, etc.), since in some cases, the searcher may not be able to get as specific as they wish.
Note that the page offers cross-references. These are related industries not represened by the number you're looking at. In the case of pet grooming, cross reference numbers are provided for veterinary, horse boarding, and pet transportation services; these are covered elsewhere. This is helpful when one of the cross-references more accurately fits the industry sought by your customer.
Pay attention to anything in parenthesis! Generally, this is to exclude business operations not intended to be represented by the number at hand. In the case of pet grooming, the heading is: Pet Care (except Veterinary) Services. This tells you that anything regarding veterinary medicine will have a different NAICS (and SIC) number.

Important things to know about NAICS & SIC

What are NAICS & SIC Codes

2010-01-29T22:11:47Z

Describes the two main systems of business classifications, or codes.

SIC, or Standard Industrial Classification, is a system created in the 1930s, last revised in 1987. It's a scheme by which each product or service, whether manufacturing, wholesaling, or retailing, is identified by a 4-digit number with added-on extensions to further delineate specific businesses under a major heading or industry group.

NAICS (rhymes with "bakes"), or the North American Industry Classification System, was created in 1997, and has been revised in 2002 and 2007. This system was developed following the 1992 passage of the NAFTA (the North American Free Trade Agreement), and allows for better identification of business industries on the continent (the US, Canada, and Mexico). The system incorporates the same general industry group/business line theme used in SIC; however, numbers were lengthened to reflect added variety of business enterprises and activities. Consider that in 1987, business like the Internet and telecommunications (cell phones) didn't exist, and many new types of business services have been introduced since then. This system includes enhanced coverage of newly-introduced businesses and services. Numbers are 6-digits long, and there is occassionally no correlation between the two systems; in other words, in some cases, there may be a NAICS number, but no SIC, or merely a very general industry area in SIC.

The NAICS system replaced SIC, at least in the official reporting of business activities from federal statistical agencies; however, many other kinds of agencies and many information products, which feature these numbers in organization and searching of their product, continue to cite and use SIC numbers. Therefore, it's advisable to have a researcher of business information look up SIC and NAICS numbers related to a particular business when beginning research. This way, they'll be ready for whichever sources they use and whatever they might encounter in their research.

Finding and Understanding NAICS/SIC

Overview

2008-08-19T21:28:01Z

Guides to Resources

Websites and Internet Resources on Business Classifications

2008-06-27T23:23:36Z

A list of external links

NAICS/SIC Correspondence Table
While NAICS incorporates the same general industry group/business line theme used in SIC, in some cases there is no direct correlation between between the two. This table provides the best way of finding correlations between the two systems.
2002 NAICS Code and Titles
The NAICS Code and Titles page provides links to codes via a structural outline. The site helps place a particular code in the context of the full system.
North American Industry Classification System (NAICS)
Jointly developed by the United States, Canada, and Mexico, NAICS is a system for classifying business establishment to provide comparison statistics. It replaced the Standard Industrial Classification (SIC) codes in 1997. This site provides a keyword searchable interface.

Conclusion on NAICS and SIC

2008-05-13T19:59:49Z

Now that you understand a little about NAICS and SIC codes, you can use them to research business activities in a wide variety of products including the Economic Census (described in the Industry Research portion of this module), and in many products available through a library, including print and online business directories, online business journal databases, and information products from government agencies, state and federal. This foundation will assist you when conceptualizing how the business world is organized and how you can more easily help your customers search for data.