I’ve already introduced you to SICs on this website. Now let me reveal why the special code I included at the end of most of the business profiles is so important. The Standard Industrial Classification coding system, established by the government, is a system for categorizing and coding nearly all types of businesses into common groups while allowing some flexibility for new business types.

Who cares? You should. Your home business will probably fall into a specific SIC. Your banker will want to know the SIC code for your business. So will the SBA, the IRS (on your Schedule C/Form 1040) and others. Also, you can use your customers’ SIC codes to select specific mailing lists of new customers. Pretty handy.

How do SICs work? Here’s an example: One of the home businesses discussed in this book is an auto detailing service. The SIC code for this business is 7542-03. The first two digits—75—fall within the range between 70 and 89, meaning it is a service business. There are more businesses in the service sector than in any other, including retail. Specifically, 75 includes “Automotive Repair Services and Parts”. Going further, 7542 is the category for car washes. The suffix 03 takes the category even further to cover automobile detail and clean-up service. If the suffix were 04, the business would be an automobile upholstery cleaning service. You get the picture.

What can you learn from these numbers? You can find them on the Internet from OSHA at http://www.osha.gov/oshstats/sicser.html. In addition, list brokers such as American Business Lists (800-555-5335) sell mailing lists for specific SIC codes. The names and addresses come from telephone books and survey calls to businesses across the nation. According to broker listings, there are 11,215 businesses in the U.S. that match the SIC code for auto detailing services. Further, there are 1,553 in California (no surprises here) and 41 in Rhode Island. If you’re starting an auto detail service, this is the number of your established competitors. If your home business is selling to auto detailers, this can be a list of your potential customers. ABL is also available online at http://www.infousa.com.

There are two other coding systems that can help you find your customers and your competitors: zip codes and SMSA codes. You’re familiar with postal zip codes that identify specific geographic locations by the number of the post office serving the area. The five-digit code divides the country into 10 large geographic areas identified by the first digit—0 to 9. The second and third digits are used to divide states. The fourth and fifth digits represent local areas. Four additional digits, SMSA codes, can be added to identify a specific address.

SMSA stands for Standard Metropolitan Statistical Area, also known as MSA, for Metropolitan Statistical Area. Designated by the U.S. Census Bureau, these are areas with at least 100,000 people with strong economic and social ties to a central city. For example, the Portland-Vancouver MSA includes the cities of Portland and Vancouver as a single economic entity, though they are in neighboring states on two sides of a river. The MSA includes not only Portland and Vancouver, but their suburbs where people work and shop. This is useful information if your home business will be serving a specific geographic area.

You can learn more about SMSA and the census on the Internet at http://www.census.gov.