If you decide to put your firm’s clients into industry buckets, many leading firms map them using the North American Industry Classification System (NAICS). NAICS codes allow you a view the client’s business through the eyes of the outside business marketplace rather than the subjective viewpoints of partners entering clients into your CRM or billing system.
NAICS codes are classifications developed for use by federal statistical agencies for the collection, analysis and publication of statistical data related to the U.S. economy. Adopted in 1997 in cooperation with the statistical agencies of Canada and Mexico, it replaced the standard industrial classification (SIC) system, with the goal of establishing a North American standard.
NAICS codes allow for more flexibility than the former classification system’s four-digit structure. It uses a hierarchical six-digit coding system, classifying all economic activity into 20 different industry sectors. Five sectors are primarily those that produce goods, while the remaining 15 sectors provide some type of service. Every company receives a primary NAICS code, indicating its main line of business. This primary code is determined by the code definition that generates the largest revenue for a company at a specified location in the past year. NAICS is an objective source of your clients’ industry information. Using NAICS codes, you’ll achieve greater accuracy with less debate and fewer inconsistencies.
TIP: There are numerous free resources on the internet where you can capture your clients’ NAICS codes. For a fee, you can even automate the flow of your clients’ NAICS codes into your system of record. Let me know if you need help with this process.
Today, with so many automated and commoditized services, the question isn’t whether to specialize in industries, but what’s the best way to get started? How do you set up for success in your mission to develop and deliver industry specialization to your clients and targets?
The NAICS coding system is an essential tool in your firm’s toolbox. It will help you identify your clients’ and targets’ industries accurately map clients to all industries ─ enabling you to devise an effective industry strategy and choose the industries on which you want to focus.
