Making the Most of Business Classification Systems

Business classification systems can be a resource for the successful operation of a business

Business classification systems offer a standardized method of classifying businesses into industrial groups that allows the United States Census Bureau to collect, present and analyze data for statistical purposes. Businesses in the agricultural, construction, communications, wholesale trade and public administration are just a few of the business sectors receiving an industry code.

The business classification index, which started in 1937, consisted of four digits and referred to as the Standard Industrial Classification or SIC Code. In 1997, the classification of businesses became more detailed and expanded into 6 digits and was renamed the North American Industry Classification System or NAICS to allow statisticians to analyze economic activity for Canada, United States and Mexico. Making the most of business classification systems requires one to understand what each digit designates. Digits 1 and 2 refer to the largest business sector, digit 3 refers to the subsector, digit 4 the industry group, digit 5 the industry and digit 6, the national industry.

Making the most of business classification systems also requires actively using NAICS Codes in a variety of applications such as:

1. Converting SIC Codes to NAICS Codes

2. Obtaining government contracts

3. Determining whether government regulations apply to a business

Convert SIC Codes to the NAICS industry classification system to aid you in data analysis

Convert Standard Industrial Classification (SIC) industry codes to the North American Industry Classification System (NAICS) to have the ability to present and analyze current and historical data provided by the United States Census Bureau.
United States Census Bureau allow the conversion of SIC Codes to NAICS Codes and NAICS Codes to SIC Codes as some government agencies are still utilizing SIC Codes in their classification of business operations.

Research and obtain government contracts by querying postings using a NAICS or SIC Code

Government agencies can post contract information by its business classification systems code. Reduce the time spent searching contract postings by querying on the business classification systems code.
Federal Contractor and become eligible to bid on government contracts such as those found on Federal Business Opportunities that provides an easy to use search tool allowing one to query business opportunities using the NAICS Code.

Use business classification systems to determine whether you must meet government regulations

Government agencies, particularly the Environmental Protection Agency, have regulations and policies in effect which specific businesses and industries must comply with. Industry classification systems specify those businesses and industries targeted by a particular program to help eliminate confusion and clear any gray areas.
Environmental Protection Agency (EPA) website to see if any regulations affect your business sector. One regulation that affects many businesses for which they must obtain permitting for is the National Pollutant Discharge Elimination System (NPDES). Contact the National Stormwater Center for permitting assistance.
  • When classifying a business, you may find there may be one or more business classification codes that apply and you cannot decide which one to select as a primary code. The general rule for these circumstances is to select the business classification code that generates the most revenue.

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