Which NAICS code to pick for technology projects?
One of the cornerstones of the business programs at Concordia University’s John Molson School of Business is entrepreneurship. Students have to perform advances industry and market research to write a business plan. I often have to assist them in determining the “main business” they are engaged in, specifically which industry code(s) to pick as the basis of their project.
Firstly, I like to point out that projects spanning multiple industries, markets, trends or technologies will probably have to pick a few codes, at least 2 or 3 of them. That is the only way to capture the complexity of disrupting an industry – by looking at a few angles.
Secondly, entrepreneurs researching a business plan will have to adapt existing reports and data to their unique idea. Dealing with imprecise information is not easy and simply looking for “perfect” information will usually not yield a comprehensive and authoritative project report. So, cast a slightly wider net and pick the best tidbits, rather than being too discriminating.
Thirdly, I have created a comprehensive 9-step research protocol for business plans, supported with 19 YouTube tutorial walk-through. I recommend that any entrepreneur go through this protocol to research their business idea.
Early in this process, entrepreneurs are asked to pick an industry code from the North American Industry Classification System (NAICS) to guide their exploration of many tools. These code have 2 to 6 digits, the more digits you have, the more precise the industry (say from “41” for “Wholesale Trade” to “419110” to “Business-to-business electronic markets”). Usually, having a 5 digit code is best.
A common problem entrepreneurs bring to me has to do with picking the right code for emerging technological fields. Here are the most common NAICS codes in the tech industry and how to navigate between them, drawing from a non-exhaustive list based on my experience:
|335||Electrical equipment, appliance and component manufacturing|
|4541||Electronic shopping and mail-order houses|
|5182||Data processing, hosting, and related services|
|5415||Computer systems design and related services|