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Understanding the NAICS Code and How to Choose a Primary NAICS Code

December 2, 2016

 

A NAICS code is a series of numbers (up to six digits) that establishes a specific business activity by the Federal Government. Your primary NAICS code is the six digit code that represents the largest segment of your business’s revenues earned within its most recently completed fiscal year.

 

How to determine a primary NAICS Code?

 

You can use the search feature at www.census.gov/naics. Within the search box, enter a keyword that describes the services provided by your business. A list of primary business activities containing that keyword and the corresponding NAICS codes will appear. Choose the one that most closely corresponds to your primary business activity, or refine your search to obtain other choices.

 

The following are two examples:

 

1. If you are a business in which your largest segment of revenue earned in its most recently completed fiscal year was as a software developer, your primary six digit NAICS code would be 541511.

 

2. If you are a business in which your largest segment of revenue earned in its most recently completed fiscal year was in commercial construction, your primary six digit NAICS code would be 236220.

 

What is the purpose of establishing a primary NAICS within my 8(a) Application?

 

1. It represents to the SBA what your primary business activity is (e.g. what your business does). It is important to note, that your supporting documentation such as the copies of contracts/invoices showing the scope of work performed will back up your establishment of your primary NAICS code.

 

2. Once you establish your primary NAICS code, the SBA will review your last two years of contracts and taxes to determine if you have earned the largest segment of your revenues within this NAICS code and if the revenues are deemed to be sufficient to meet the two years in business requirement. If you have not earned the largest segment of revenues within your primary NAICS code for two consecutive years, you will not meet the potential for success criteria established by the SBA unless you seek a two year waiver.

 

3. Finally, it establishes your SBA size standard limit. You must be classified as a small business concern to participate within the 8(a) Program. You can view more information on size standards at www.sba.gov/content/guide-size-standards

 

Can you have more than one primary NAICS code?

 

No. You can only have one primary NAICS code. However, you can multiple secondary NAICS codes listed within your SAM (System for Award Management) or DSBS (Dynamic Small Business Search) profile.

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