Can NAICS Code be 3 Digits?
NAICS codes are typically six digits, with the first three digits indicating the broader industry sector.
Navigating the world of government contracting can be complex, especially when it comes to understanding the nuances of NAICS codes. In this blog post, we'll dive into the key aspects of NAICS (North American Industry Classification System) codes, their role in government contracts, and their relation to the GSA Schedule.
A NAICS code is a numerical classification system that categorizes businesses based on their primary business activities. It's crucial for government contracting and statistical analysis.
NAICS code descriptions provide a detailed explanation of what each code represents, which helps in accurately identifying your business category.
Businesses can select their NAICS codes when registering their business, but it should accurately reflect their primary business activity. Changes can be made if the business's primary activity changes.
NAICS code are not something you obtain or receive. You would look up the type of service you offer within the NAICS code definition and you determine what NAICS code fits your company and choose one. You can have more than one, but you must choose a primary one. Choose the one you do more revenue in.
NAICS codes are vital for business statistics, economic analysis, and ensuring that government contracts are awarded to appropriate businesses.
Each NAICS code has a corresponding size standard, which the government uses to determine if a business qualifies as a small business.
NAICS classifies businesses, while PSC (Product Service Code) is used specifically for government contracts to describe products, services, and research and development purchased by the government.
NAICS replaced the SIC (Standard IndustrialClassification) system. While similar in purpose, NAICS provides a more detailed classification.
SIN (Special ItemNumber) is used in GSA Schedules to categorize products and services more specifically than NAICS codes.
NAICS codes are typically six digits, with the first three digits indicating the broader industry sector.
NAICS codes categorize businesses based on their primary economic activity. You can determine your business's NAICS code by searching the official NAICS website.
When SAM.gov asks for your NAICS, input the code that best describes your primary business activity, but you can add as many as you like. If you’re offering professional service and technology solutions, you should add these to your SAM.gov account:
Businesses can have multiple NAICS codes, you can self-certified and pick the NAICS Code you want.
NAICS codes are used to classify businesses for government contracts, ensuring that the rightbusinesses are bidding for the right opportunities.
NAICS and the GSA Schedule?
For businesses looking to get onto a GSA Schedule, correctly identifying your NAICS code is crucial as it determines your eligibility and the type of contracts you can pursue. Use the table below to find the GSA SIN Category that aligns with your NAICS Code.
Two year financial statements (non-audited) with a positive cash flow of over $25k per year.
Have two relevant project experiences within the SIN you are bidding on. Don’t have it, we can work with you to find a substitute requirement.
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Size Standards and Their Role in Classifying Businesses
Understanding size standards is as crucial as understanding NAICS codes when it comes to government contracting. Size standards are set by the Small Business Administration (SBA) and determine whether a business qualifies as a "small" business. These standards are pivotal in government contracts, as certain contracts are set aside specifically for small businesses.
What is a Size Standard?
A size standard, typically expressed in either number of employees or annual revenue, varies by industry as defined by the NAICS code. It's a means to maintain a level playing field in government contracting, ensuring that small businesses aren't edged out by larger competitors.
Example of Size Standard in Action
Let's consider a business operating under the NAICS code 541512 (Computer Systems Design Services). According to the SBA's current size standard, if this business has annual revenues of $30 million or less, it qualifies as a small business. Conversely, if the revenues exceed this threshold, it's classified as a large business.
Why Size Standards Matter?
Size standards matter because they determine eligibility for various government programs, including contracting opportunities and SBA loans. Small businesses often have access to exclusive contracts, set-asides, and other competitive advantages in government procurement.
Conclusion
Incorporating an understanding of size standards along with NAICS codes can significantly impact your strategy in government contracting. By knowing where your business falls in these classifications, you can better navigate the opportunities and resources available for either small or large businesses in the government contracting landscape. This knowledge is essential for leveraging the benefits available to small businesses, especially in the realm of government contracts and the GSA Schedule.
1. Identify Your NAICS Code:
The first step is to identify the NAICS (North American Industry Classification System) code that corresponds to your primary business activity. You can find your NAICS code by searching the NAICS website, or:
2. Refer to the SBA's Size Standards:
Once you have your NAICS code, refer to the SBA’s size standards to find the corresponding size standard for your industry. The SBA updates these standards periodically, so ensure you're looking at the most current information.
Consult the following table to identify the services offered by your company. Match these services with the most appropriate NAICS (North American Industry Classification System) codes. Record the NAICS codes that best represent your company's activities. Additionally, note the size standards associated with each selected NAICS.
3. Understand the Criteria:
Size standards are expressed either in terms of average annual receipts (revenue) or the number of employees. The criteria vary significantly depending on the industry.
4. Calculate Your Business Size:
For annual receipts:
Total your business’s receipts over the past three to five years, then calculate the average. The SBA often defines 'receipts' broadly, including all revenue in whatever form received or accrued
For number of employees:
Calculate the average number of employees over the past 12 months. The count includes all individuals employed on a full-time, part-time, or other basis.
5. Compare with SBA Standards:
Compare your calculated average annual receipts or number of employees against the SBA’s size standard for your industry. If your business is at or below the threshold, you qualify as a small business.Be aware that the SBA's calculation includes the figures of your business and those of its affiliates. Understanding how the SBA defines affiliates is crucial.
6. Seek Assistance if Needed:
If you're unsure about determining your size standard or have specific questions, consider seeking assistance from an SBA district office, a Small Business Development Center, or a legal professional experienced in SBA regulations.
By following these steps, you can accurately determine your business’s size according to SBA standards, which is a fundamental aspect of participating in government contracting and various small business programs.
To determine whether a business qualifies as small or large under each professional and technology NAICS code, the Small Business Administration (SBA) uses the average annual receipts (revenue) over a specific number of years. The SBA typically uses a 5-year average for most industries, but it's important to verify the specific standard for each NAICS code, as there can be variations. If Blackfyre revenue was $10M in Year 1, $20M in Year 2, $30M in Year 3, $5M in Year 4, and $1M in Year 5, we calculate the average revenue over these five years and compare it against the size standards for each NAICS code:
Total Revenue over 5 Years:
10M (Yr 1) + 20M (Yr2) + 30M (Yr3) + 5M (Yr4) + 1M (Yr5) = 66M Total
Average Annual Revenue:
66M/5 Years = 13.2M
• 541511 Custom Computer Programming Services
o Size Standard: $30 million
o Blackfyre Status: Small Business
• 541219 Other Accounting Services
o Size Standard: $22 million
o Blackfyre Status: Small Business
• 541330 Engineering Services
o Size Standard: $16.5 million (Special $41.5 million for certain services)
o Blackfyre Status: Small Business
• 541360 Geophysical Surveying And Mapping Services
o Size Standard: $16.5 million
o Blackfyre Status: Small Business
• 541512 Computer Systems Design Services
o Size Standard: $30 million
o Blackfyre Status: Small Business
• 541513 Computer Facilities Management Services
o Size Standard: $30 million
o Blackfyre Status: Small Business
• 541519 Other Computer Related Services
o Size Standard: $30 million
o Blackfyre Status: Small Business
• 541618 Other Management Consulting Services
o Size Standard: $16.5 million
o Blackfyre Status: Small Business
• 541611 Administrative Management
o Size Standard: $16.5 million
o Blackfyre Status: Small Business
• 541620 Environmental Consulting Services
o Size Standard: $16.5 million
o Blackfyre Status: Small Business
• 561110 Office Administrative Services
o Size Standard: $8.5 million
o Blackfyre Status: Large Business
• 561410 Document Preparation Services
o Size Standard: $16.5 million
o Blackfyre Status: Small Business
• 561439 Other Business Service Centers (Including Copy Shops)
o Size Standard: $8.5 million
o Blackfyre Status: Large Business
• 561990 All Other Support Services
o Size Standard: $12 million
o Blackfyre Status: Small Business
• 611420 Computer Training
o Size Standard: $12 million
o Blackfyre Status: Small Business
• 611430 Professional And Management Development Training
o Size Standard: $12 million
o Blackfyre Status: Small Business
With an average annual revenue of $13.2 million, Blackfyre would qualify as a small business in most of the NAICS codes, except for "561110 Office Administrative Services" and "561439 Other Business Service Centers (Including Copy Shops)", where the size standard is lower. This classification is essential for their participation in small business set-asides and government contracting opportunities.
You would do the same for your company.