What is NAICS code for small business

NAICS codes determine if your company qualifies as a small business for federal contracts, based on specific size standards. The SBA uses these codes for statistical analysis and opportunity identification, essential for GSA contractors.

By Douglas Wade, Attorney

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Table of Contents

1. How do you get designated as a small business?

2. What is the purpose of NAICS Codes?

3. How to Use NAICS Codes to Determine Whether You Are a Small Business

4. Changes to the NAICS Code

5. You Are Approved as a Small Business—What Comes Next?

6. Set-Asides for Small Businesses

How do you get designated as a small business?

It may surprise you to learn that a small business certification can bolster marketing and sales campaigns for new federal business possibilities. The Small Business Administration (SBA) sets annual targets for the percentage of the budget that is allocated to small business contracts. Therefore, it’s imperative to determine whether your organization qualifies for small-company set-aside deals, but how can you do so?

The North American Industry Classification System (NAICS) holds the answer to this problem. If your company meets specific NAICS size rules, its NAICS codes might assist in establishing whether it is considered a small business. In order to assist businesses in receiving their designation and identifying possibilities that they may be eligible for, the SBA established size guidelines for NAICS Codes through the Small Business Act. Let’s examine NAICS Codes and their implications for your company.

What is the purpose of NAICS Codes?

Let’s first go through what NAICS codes are in brief. Government organizations employ the six-digit NAICS Codes to categorize commercial businesses. The purpose is to gather, summarize, display, and analyze statistical data related to the American economy.

NAICS Codes are categorized by industry according to the methods utilized in the production of goods and services. Because GSA Schedule contractors are self-assigned, they are free to select in the System for Award Management (SAM) the NAICS Code that most accurately reflects their primary industry.

GSA contractors value their NAICS numbers because they can utilize them to identify business prospects, particularly if they are regarded as small businesses.

How to Use NAICS Codes to Determine Whether You Are a Small Business

The simplest method to determine small business size guidelines for your organization is to check the SBA website. You can see whether your company is eligible for opportunities under a particular NAICS Code by looking up the threshold value for revenue or the number of workers assigned to that NAICS Code. The SBA classifies you as a small business concern if the size of your organization is less than the specified amount or number of employees.

The SBA’s Size Standards Tool is another useful resource for understanding and recognizing size standards as well as figuring out where you fit into the small business environment.

Assume, for example, that you are the owner of an IT business with products listed under Electronic Computer Manufacturing, or NAICS Code 334111. Input the total number of employees and choose that NAICS from the drop-down menu. After that, the program will provide the outcome, verifying whether or not you qualify as a small business for government set-aside contracts.

Changes to the NAICS Code

It’s vital to remember that NAICS Codes are changed every five years to account for shifts in the North American economy. The NAICS Codes were changed in 2022, bringing about a few significant changes that affected many industries. Software publishers, for instance, are now classified under NAICS Code 513210 instead of 511210. This is one of the most popular 5 NAICS Codes for FY 2022. Therefore, the fact that the number is shifting is significant. We advise you to check the modifications from the previous year to see if they affected your business. The United States Census Bureau website has the most recent versions of the NAICS codes.

You Are Approved as a Small Business—What Comes Next?

In the world of GSA contracting, the label “Small Business” is a significant one. Numerous resources, services, and programs are available to you to support your small business’ success.

Set-Asides for Small Businesses

Small company set-aside contracts are available to you if the SBA considers you to be a small business. Small company set-asides are precisely that—special contracts that are reserved by the federal government for which only small firms are eligible to bid.

A portion of the set-asides is allocated to socioeconomic initiatives. These include the following: HUBZone, women-owned, service-disabled, veteran-owned, and 8(a) business development.

Use the tools at your disposal and avoid losing out on possible set-aside funds by taking advantage of the SBA’s easy-to-understand guidelines regarding business size.

Have a quick question? We answered nearly 2000 FAQs.

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