A NAICS Code is a standardized numerical code used to classify businesses by industry type and primary business activity. Used in the U.S., Canada, and Mexico, NAICS codes identify what type of business you are—software development, management consulting, cloud services, etc. The federal government uses NAICS codes to determine: small business size standards for your company, which set-asides you're eligible for (WOSB, SDVOSB, HUBZone), whether your company meets solicitation qualifications, and how agencies categorize contractors. Every federal contractor must register one or more NAICS codes in SAM.gov. Selecting correct NAICS codes is critical—wrong codes can disqualify you from competitions or result in size standard misclassification.
Opening Definition
NAICS Code is a standardized industry classification used to identify business type. Required in SAM.gov; determines small business size standards, set-aside eligibility, and capability classification for federal contracting.
Why It Matters for Tech Companies
Your NAICS code determines your small business size standards—the revenue threshold below which your company qualifies as "small." For example, Computer and Data Processing Services (code 518210) has a $27.5M size threshold. If your annual revenue is $10M, you're small under this code. But if you register under a different NAICS with lower threshold ($14M), you'd be considered large. Size standard misclassification can: disqualify you from small business set-asides, result in contract cancellation if discovered, or give competitors grounds for protest.
How It Works in Practice
Step 1: Identify Primary Business (Month 1) What's your company's primary product/service? Not all capabilities—your PRIMARY business. Step 2: Research NAICS Codes (Month 1) Use Census Bureau NAICS Search tool. Find codes matching your business. Step 3: Verify Size Standards (Month 1) Each NAICS code has associated size standard. Verify your company meets small business size. Step 4: Register in SAM.gov (Month 1-2) During registration, select your NAICS codes. Step 5: Document Justification (Ongoing) Be prepared to justify your NAICS selections if challenged. Example: Software development firm offering cloud migration, managed services, and legacy system modernization. Primary business: cloud services. Register NAICS 518210 (Data Processing Services, $27.5M size threshold). Secondary service: consulting on modernization. Register NAICS 541512 (Computer Systems Design Services, $29M threshold). Under both codes, $10M revenue firm is "small."
Common Mistakes to Avoid
- Registering wrong codes: Register codes matching PRIMARY and significant SECONDARY services only. Don't register every possible related code.
- Not verifying size standards: Each NAICS has different threshold. Company can be small under one NAICS and large under another.
- Not updating as business evolves: If primary business changes, update SAM.gov.
- Assuming NAICS selection is permanent: You can change codes, but changes can create complications.
- Confusing NAICS with SIC code: SIC codes are obsolete (replaced by NAICS in 1997). Use NAICS.
Key Facts and Numbers
- 6-digit numerical codes (e.g., 518210, 541512)
- Approximately 1,000 codes covering all business types
- Established by Census Bureau, updated every 5 years
- Each code has associated small business size standard (varies $3.5M to $38.5M)
- Required in SAM.gov registration
- Companies can register multiple NAICS codes
Related Terms
Related Guides
Selecting Correct NAICS Codes • Federal Contractor Setup Checklist
Frequently Asked Questions
How many NAICS codes should I register?
Register codes matching your primary and significant secondary business activities. Most contractors register 1-3 codes.
What happens if I'm classified as large instead of small?
You lose eligibility for small business set-asides. This significantly reduces federal contracting opportunities.
Can I change my NAICS codes?
Yes, but changes should be uncommon. Only change if your business fundamentally shifts.
How do I know if my company is small for my NAICS code?
Compare your annual revenue to SBA's size standard for your NAICS. If revenue below threshold, you're small.