NAICS codes (North American Industry Classification System) identify your business industry for federal contracting and statistical purposes. Your NAICS code determines your applicable federal contracting size standards, influences which federal opportunities you can pursue, and affects how federal agencies categorize and search for contractors like you. Understanding NAICS codes and selecting the correct code for your business is essential to federal contracting success.
What Are NAICS Codes?
NAICS codes are standardized industry classification codes used by federal statistical agencies to classify business establishments by their economic activity. The codes are six digits long. The first two digits identify the industry sector, the next two digits identify the industry subsector, and the last two digits identify the specific industry.
For example, NAICS code 541511 identifies custom computer programming services. The first two digits (54) identify information technology professional services. The next two digits (15) narrow to computer systems design and related services. The last two digits (11) further specify custom computer programming services.
Why NAICS Codes Matter
Federal agencies use NAICS codes to classify opportunities and search for contractors. When a federal contracting officer posts an opportunity, they assign NAICS codes indicating the type of work being purchased. Federal contracting officers then search SAM.gov for contractors registered in those NAICS codes.
If your business is registered in the correct NAICS codes, federal agencies can find you when they search for contractors in your industry. If you are registered in incorrect NAICS codes, you become invisible to agencies searching for contractors in your actual industry.
NAICS codes also determine your applicable size standards. The SBA uses NAICS codes to classify businesses and assign size standards. Different industries have different size standards based on annual revenue or number of employees. Your NAICS code determines which size standard applies to your business.
If your business is classified under the wrong NAICS code, you might be classified as large when you are actually small, or vice versa. This misclassification can affect your eligibility for small business set-asides and federal contracting opportunities.
Finding Your NAICS Code
The Census Bureau maintains the official NAICS code directory. You can search for NAICS codes at census.gov/naics.
To find your NAICS code, describe your primary business activity. The NAICS search tool uses keywords to identify potential NAICS codes. Review the descriptions of potential codes to find the one that best matches your business.
For example, if you are a management consulting firm, you might search for management consulting. The NAICS search will return several consulting codes. Review each code's description to find the one that best matches your specific consulting services.
Many businesses operate in multiple industries. In these cases, you may need multiple NAICS codes. Determine your primary business activity, then identify secondary activities. You can register in SAM.gov with multiple NAICS codes.
Understanding NAICS Code Levels
NAICS codes have different levels of specificity. A two-digit code identifies a broad industry sector. A four-digit code identifies an industry group. A six-digit code identifies a specific industry.
When searching for your NAICS code, use the most specific six-digit code that matches your business. This specificity helps federal agencies find you accurately.
For example, all consulting services might fall under the two-digit code 54 (Professional, Scientific, and Technical Services). Management consulting is code 5416. Management consulting services are code 541611. If you provide management consulting, register under 541611 rather than the broader 54 or 5416 codes.
NAICS Codes and Size Standards
Each NAICS code has an associated SBA size standard. The size standard is either based on annual revenue or number of employees, depending on the industry.
For service-intensive industries like consulting, the size standard is usually based on annual revenue. For manufacturing or capital-intensive industries, the size standard might be based on number of employees.
To find your size standard, identify your NAICS code, then check the SBA size standards table. The table shows the applicable size standard for each NAICS code.
For example, NAICS code 541611 (Management Consulting Services) has a size standard of $10 million in average annual revenue. If your business exceeds this revenue, you cannot qualify as a small business in this classification.
Correctly Classifying Your Business
Many businesses struggle to classify themselves correctly in NAICS codes. Common mistakes include selecting a NAICS code based on business size rather than business activity, or selecting a broader NAICS code rather than the most specific code.
NAICS classification should be based on your actual business activities, not your business size. Even if you are a small team, if you provide management consulting, your NAICS code is 541611, regardless of your company size.
Select the most specific NAICS code that matches your business. Do not select a broader code thinking it gives you more flexibility. Federal agencies search for specific NAICS codes. Being classified under a broader code may make you harder to find.
If your business truly spans multiple industries, register in multiple NAICS codes. For example, if you provide both IT consulting and management consulting, you might register in both 541511 (custom computer programming) and 541611 (management consulting).
NAICS Codes in SAM.gov Registration
When registering in SAM.gov, you will be asked to provide your NAICS codes. Enter the specific NAICS codes that match your business activities. You can provide up to five NAICS codes if your business spans multiple industries.
Accurately classifying your business in SAM.gov ensures that federal agencies can find you when they search for contractors in your industry.
Changing Your NAICS Code
If you initially register with incorrect NAICS codes, you can update your SAM.gov registration to correct them. Changes to NAICS codes become effective on your next registration update.
If you acquire new capabilities or expand into new industries, add new NAICS codes to your SAM.gov registration. This expands the opportunities federal agencies can find you for.
NAICS Code Resources
Beyond the Census Bureau's search tool, several resources help you understand NAICS codes. The SBA website provides NAICS code information and size standards. The SBA's website includes a searchable database of size standards by NAICS code.
Federal contracting consultants can help you identify the correct NAICS code for your business. Consultants understand NAICS classification nuances and can help you avoid misclassification.
Common NAICS Classification Mistakes
Many federal contractors make NAICS classification mistakes that affect their federal contracting success. Common mistakes include selecting NAICS codes based on business structure rather than business activities, selecting broader NAICS codes to capture more opportunities, or failing to update NAICS codes when business activities change.
These mistakes make your business harder for federal agencies to find and may cause you to be classified as large when you should be classified as small.
Using NAICS Codes in Opportunity Search
When searching SAM.gov for federal opportunities, filter by NAICS code. This filters opportunities to those relevant to your industry. If you are classified in the correct NAICS codes, filtering by your codes shows the opportunities agencies are looking for contractors in your industry.
NAICS Codes and Federal Contracting Success
Correct NAICS code classification is foundational to federal contracting success. Accurate classification helps federal agencies find you, ensures you are classified with correct size standards, and determines which federal opportunities are available to you.
Invest time in understanding your business's correct NAICS code. Register accurately in SAM.gov. Update your NAICS codes if your business changes. This administrative attention ensures federal agencies can find and contract with you.