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The US Census Bureau is a great resource that most entrepreneurs over look. Aside from all of the excellent demographic information that you can find, the Census also handles industry classification codes, known as NAICS (pronounced nix), which stands for North American Industry Classification System. While it is certainly important to understand the demographics of an area to better target your advertising and marketing, it is equally important to understand who your competitors are, and the Census Bureau can help us there, too.

The NAICS code for a given business will be six digits long. For instance, I am engaged in the sale of real estate. But if you type in Real Estate into the search box on the NAICS website, you get numerous results. There is Lessor of Nonresidential Buildings, code 531120. Since I am a Realtor, I am better classified under Offices of Real Estate Agents and Brokers, code 531210. This is a good time to point out that any one business could fall into multiple class codes. If I was a Realtor that also handled the leasing of non-residential buildings, both codes might apply. You certainly wouldn’t be able to put General Electric into one classification code; rather, you would have to determine a number of codes that apply to its divisions.

One more important thing to note: the classifications can be very broad or very narrow. The more zeros there are at the end of a classification code, the broader the label. For instance, code 445000 is Food & Beverage Stores. Code 445100 is Grocery Stores. Code 445120 is Convenience Stores. This helps identify the industry and any particular niches within the industry.

So where am I going with all of this? If you know the classification that applies to your own business, your products and services, and your industry in general, then you can identify a number of things. You can identify who your greatest threats are with respect to competition. Then there are potential new customers if you’re a Business-to-Business (B2B) entity. You can even see whom your suppliers’ competitors are in your supply chain to help you find the best prices for the things you need to run your business.

So you’re saying to yourself: so I have a few numbers scribbled on a sheet of paper. What do I do with these things?! Well, aside from scouring the Internet and researching individual companies, my best advice is to walk into any public library and head to the reference section. Ask any librarian where you can look up companies by NAICS codes and they should have a directory to assist you. You may have to specify the full name of the NAICS when asking for its directory.

Also, as a brief side note, the NAICS replaced the US Standard Industrial Classification system (known as the SIC). Since the NAICS is relatively newer, you will see references to both codes. Just know they are essentially serving the same purpose, to identify industries and classes of businesses.

This same data can be used by investors when deciding whether to invest in a company or not! Using this data can help compare a company to its peers and the industry as a whole. Is the company considered a leader or a laggard?! Even if they are a leader, is this an industry that you want to be investing in right now?! This data helps find answers to these questions.

As always, I welcome your comments and feedback…

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