Guide · PlainBizBench
NAICS Codes Explained: Your Industry Classification Guide
How to find the right NAICS code for your business and why it is the key to accurate industry benchmarking.
Key Takeaway
Your NAICS code determines which industry benchmark you should compare against on PlainBizBench. Using too broad a code (4-digit instead of 6-digit) can make your benchmarks meaningless, a general "Food Manufacturing" benchmark is far less useful than "Frozen Fruit and Vegetable Manufacturing." Find your most specific NAICS code before benchmarking.
What NAICS Is and Why It Matters
The North American Industry Classification System (NAICS) is the standard framework used by the IRS, Census Bureau, Bureau of Labor Statistics, and other federal agencies to categorize businesses. When you file taxes, the IRS uses your NAICS code to group your return with similar businesses for statistical analysis. When the Census Bureau publishes County Business Patterns data, it organizes employment and payroll figures by NAICS code.
PlainBizBench uses NAICS codes to link IRS financial data with Census employment and payroll data, creating comprehensive industry profiles. Browse by sector (2-digit NAICS) or search for your specific industry code.
The NAICS Hierarchy
What it tells you: NAICS uses a hierarchical structure from broad to specific. A 2-digit code identifies the sector (e.g., 44-45 = Retail Trade). Adding digits narrows the classification: 3 digits = subsector (e.g., 445 = Food and Beverage Retailers), 4 = industry group (4451 = Grocery and Convenience Retailers), 5 = industry (44511 = Supermarkets and Other Grocery Retailers), and 6 = national industry (445110 = Supermarkets and Other Grocery, except Convenience, Retailers).
What it doesn't tell you: NAICS classifies businesses by their primary activity. A grocery store that also has a pharmacy is classified as a grocery store, not a pharmacy. Diversified businesses are classified by their largest revenue stream, which may not reflect the full scope of their operations.
How to use it: Start with the broadest match on PlainBizBench (sector), then drill down to the most specific available NAICS code. The more specific the code, the more comparable the benchmark. A pizza restaurant comparing against "Full-Service Restaurants" (722511) will get a better benchmark than comparing against all "Food Services and Drinking Places" (722).
Finding the Right Code for Your Business
Many business owners use an overly broad NAICS code because they selected it during initial registration without much thought. This can lead to benchmarking against a category that includes very different businesses from yours. A custom software developer classified under broad "Computer Systems Design" is benchmarked alongside very different business models.
To find your most accurate NAICS code, search PlainBizBench by keyword to browse available industry classifications, or use the Census Bureau's official NAICS search at census.gov/naics. When in doubt, choose the most specific code that accurately describes your primary revenue activity.
If your business spans multiple NAICS codes, benchmark against the code that represents your primary revenue source. You can also look at secondary codes for context, understanding how each segment of your business compares to its respective industry average.
What This Means for Your Business
Step 1, Verify your NAICS code. Check your most recent tax filing or business registration. Is it the most specific code available?
Step 2, Search PlainBizBench. Look up your NAICS code to see the profit margin, payroll per employee, and employment data for your industry.
Step 3, Compare at multiple levels. Check your 6-digit industry benchmark AND the broader 4-digit and 3-digit levels. This shows how your specific niche compares to the broader sector.
Step 4, Consider reclassification. If your current NAICS code is too broad, ask your tax preparer about using a more specific code on your next filing. This improves the accuracy of your benchmark comparison.
Frequently Asked Questions
What is a NAICS code?
NAICS (North American Industry Classification System) is the standard used by US federal agencies to classify businesses by their primary activity. Every business in America is assigned a 2- to 6-digit code. The 2-digit code identifies the sector (e.g., 31-33 = Manufacturing). Each additional digit narrows the classification: 3 digits = subsector, 4 = industry group, 5 = industry, 6 = national industry. PlainBizBench uses NAICS codes to organize industry financial benchmarks.
How do I find my business's NAICS code?
Search by industry keyword on PlainBizBench or use the Census Bureau's NAICS search tool at census.gov/naics. Your NAICS code was assigned when you registered your business and appears on government filings. If you have multiple business activities, your NAICS code should reflect your primary revenue-generating activity. Many businesses use an overly broad code, verify that yours is at the most specific level possible for accurate benchmarking.
How many NAICS codes are there?
There are 20 two-digit sector codes, approximately 100 three-digit subsectors, and over 1,000 six-digit national industry codes. PlainBizBench shows financial data at multiple NAICS levels, with the most detailed data available for industries that have enough businesses to report without privacy suppression.
Do NAICS codes change?
NAICS is revised every 5 years (most recently in 2022) to reflect changes in the economy. New industries are added, obsolete ones are removed, and some are reclassified. The 2022 revision added codes for new industries like data processing infrastructure and autonomous vehicle technology. When codes change, historical comparisons require mapping old codes to new ones, PlainBizBench uses the most current NAICS classification.
