"Here a SIC, There a SIC, Everywhere a SIC, SIC..."
The President's Message, January 1999
by Michael I. Roman, MBI's Past President, Resun Leasing Incorporated

Federal and state governments and a broad group of interested parties use SIC codes to classify companies for a variety of analyses. It is essential our member companies report under common SIC codes in order to create an industry identity. Consequently, after a brief discussion of the SIC code system, I am offering a recommendation that all dealers and manufacturers change to common SIC codes. The change should take you about 3 minutes on the phone with Dun & Bradstreet.

The Standard Industrial Classification System

The U.S. Government developed a four-digit Standard Industrial Classification (SIC) System in the 1930's as a system to define and analyze industries. Today, SIC Codes are used by analysts, planners and business strategists to meet a wide variety of marketing and strategic needs including market planning and development, customer analysis, economic analysis, sales prospecting, sales forecasting and merger and acquisition analysis, among many others. Although the SIC system is periodically revised by the Federal Government to reflect changes in the structure of the economy, the system was not designed to meet the more detailed, highly specific industry definitions needed by today's businesses.

In 1986 Dun & Bradstreet ("D&B") developed an enhanced system by adding four new digits to the four existing digits used by the federal government. The Government four-digit SIC is known as "Base 4" and describes business activities at an industry level. The D&B system adds four digits to Base 4 and consists of 2 two-digit parts. The first two digits are a sub-industry code and the next two digits are a line of business code. The D&B four digits are known as "Extension 4".

• The SIC code is one of the most important data elements D&B provides to its customers.
   
• The SIC code appears in every single product of the business-to-business marketing units.
   
• The SIC has been widely accepted as the methodology to classify businesses by their activities.

Base 4s are assigned to a company for each activity that constitutes at least 10% of gross revenue or, if under 10%, could stand by itself as a separate business. D&B reports up to six (6) Base 4s per report in descending order of dollar volume unless management alters the order of importance. Up to four Extension 4s are then to be added to each Base 4 by D&B. The federal government administers Base 4 and D&B adds to the Base 4 digits with the four extension digits.

Our Industry

In an effort to provide continuity, to establish an industry identity and to create a unified group under a common SIC code or codes, I ran D&B reports for twenty-six (26) companies involved in our industry, without regard to whether they were MBI members or not.

The standard D&B Business Information Report provides both a description of the business together with a number of SIC codes. The SIC codes are generally listed in descending order of annual gross revenue. Although D&B can list up to six SIC codes, the most I found in my limited review of industry participants was four with one or two SIC codes being the most common. In addition, I found only Base 4 SIC codes. There were no Extension 4 codes reported.

The description of the business on each report is provided by the company while the SIC code or codes are assigned by D&B. Thus, it is not surprising that the descriptions are generally pretty good while the SIC codes vary widely.

For dealers, the description provided by the company usually included a reference to "sells and leases" and "mobile offices", "modular offices", "modular buildings" or some similar term. Manufacturers described themselves as a manufacturer of "modular buildings" or some derivation such as "modular wood buildings" or "modular steel buildings". Unfortunately, all industry searches and analyses sort not on the business description, but on the SIC codes.

Our industry participants report under a wide range of SIC codes because:

• the SIC system offers a wide range of ill-defined and often overlapping selections;
   
• there has been no continuity of reporting by our industry participants;
   
• the SIC codes are assigned by various D&B employees after reading the business description provided by the company; and
   
• MBI members may be involved in other business activities.

Since manufacturers and dealers are reported under a wide range of SIC codes, our industry does not appear as a consolidated, united force. As far as the federal government is concerned, there is no factory built building industry which sells and leases commercial structures. We are spread out over far too many categories.

Where We Are Today

Of the 26 company D&B reports I ran, our industry participants were listed under 14 separate SIC codes. Although I believe the sample of 26 is fairly representative, I'm certain a broader review would uncover even more SIC codes in use by our industry participants. Without naming names, my favorites include mobile office lessors reported as "new and used car dealers", "real property lessors", and "top and body repair and paint shops". The most predominate include "prefabricated structures" and "utility trailer rental."

Manufacturers are generally reported under "mobile homes," "prefabricated wood buildings," or "non-residential construction." Should you wish to see a list of the companies surveyed and the SIC codes reported, send me an email and I will forward the list (romanm@resunleasing.com).

Where We Should Be

Based on a review of all relevant SIC codes (Base 4) and available Extension 4, I recommend the following primary SIC code be adopted immediately by all dealers and manufacturers.

Manufacturers: 2451-0201 Mobile Buildings for Commercial Use (Mfg.). This SIC code falls under general industry 24 which is Lumber and Wood Products and subsection 2451 which is Mobile Homes. While it is unfortunate to be grouped under mobile homes, 2451-0201 is the only extended SIC code labeled "mobile buildings for commercial use". Immediately after 2451-0201 is Mobile Classrooms (Mfg.) listed as 2451-0202.

Dealers: 5039-0103 Prefabricated Buildings. This SIC code falls under general industry 50 which is Durable Wholesale Trade and subsection 5039 which is Prefabricated Structures. Although "Prefabricated Buildings" together with "wood" or "metal" can be found under several other SIC codes, I believe based on the descriptions that 5039-0103 is the best available category.

I don't believe SIC code 7519 utility trailer rental is proper because this category falls under general industry 75 "Auto Repair, Services, Garages". Subsection 7519 is "Utility Trailer Rental" yet none of the extended 8 digit codes fits our industry.

A Simple Phone Call

A simple toll-free phone call to Dun & Bradstreet at 800-333-0505 to change your SIC code to 2451-0201 for manufacturers and 5039-0103 for dealers will group all of us together in the proper industry. If these are your primary SIC codes, you are free to use up to five additional SIC codes to classify your business. Please call D&B now. The change will place your company under the proper code and create some visibility for our industry. In exchange for 3 minutes of your time you can benefit both yourself and your industry.