SOC 2 compliance is the security audit your enterprise clients are asking about before they sign a contract. Understanding what it requires – and what it costs – is the first step to not losing deals over a documentation gap as a service organization handling client data. Fortunately, it’s more approachable than most small and midmarket business leaders expect.
Key Takeaways
- SOC 2 compliance is a voluntary but increasingly expected security certification developed by the AICPA for service organizations that store or process client data.
- The total cost can vary widely depending on your company’s size, scope, and maturity.
- Having a well-documented IT infrastructure already in place significantly reduces your readiness costs and shortens your audit timeline.
Table of Contents
What is SOC 2?
SOC 2 (short for System and Organization Controls 2) is a security audit standard developed by the American Institute of Certified Public Accountants (AICPA). It verifies that a service organization has controls in place to protect client data. A SOC 2 report doesn’t certify that you’re perfect; instead, it certifies that an independent CPA firm examined your systems and found your controls to be designed and operating as intended.
There are two types of SOC 2 reports:
Type 1
Type 1 examines the design of your security controls at a specific point in time.
Type 2
Type 2 examines whether those controls operated effectively over an observation period – typically 6 to 12 months. This is the “gold standard” enterprise buyers expect.
Most enterprise sales cycles eventually require a Type 2 report. But for companies new to SOC 2, a Type 1 is a reasonable first step that demonstrates you’ve built the controls, even if you can’t prove that they’ve been running effectively over an extended period of time.
Who Needs SOC 2 Compliance?
Any service organization that stores, processes, or transmits client data on its own systems may face SOC 2 requests. That broadly includes organizations that provide services like SaaS, IaaS, financial services, accounting firms, healthcare-adjacent vendors managing sensitive records, professional services firms, and managed IT service providers, among others.
It’s worth noting that SOC 2 is voluntary. The federal government doesn’t mandate it. But if your clients operate in a relevant service industry, they may require it contractually.
For example, there may come a time when a prospect’s procurement team sends over a security questionnaire, and line one asks for your SOC 2 report. Without it, the deal stalls or dies entirely. According to the AICPA, SOC 2 reports are increasingly used by enterprise buyers as a standard due diligence requirement.
What Does SOC 2 Require?
SOC 2 is built on five Trust Services Criteria. You don’t have to do all five, but Security is a required criteria.
- Security: Protects systems against unauthorized access, both physical and logical. This covers access controls, multifactor authentication, encryption, and incident response.
- Availability: Ensures systems are available as committed. Relevant if your clients depend on specific uptime guarantees.
- Processing Integrity: Confirms that system processing is complete, valid, and accurate. Common in financial transaction environments.
- Confidentiality: Protects information designated as confidential under your agreements.
- Privacy: Governs how personal information is collected, used, retained, and disposed of in line with your privacy notice.
In practical terms, meeting the Security criterion means documenting your controls – who has access to what, how you detect and respond to incidents, how you manage vendors, and how you keep systems patched and current.
The specific controls and requirements for your SOC 2 audit will depend on your organization’s unique circumstances and the scope of the audit.
How Much Does SOC 2 Certification Cost?
Here’s a breakdown of what small to mid-sized organizations may spend for a SOC 2 Type 2 certification.
| Service | Cost |
|---|---|
|
Readiness assessment |
$15,000 |
|
Risk assessment |
$10,000 – $20,000 |
|
Penetration test |
~$15,000 |
|
Compliance prep |
$25,000 – $85,000 |
|
Type 2 Audit |
$12,000 – $100,000 |
|
Ongoing maintenance |
$10,000 – $160,000 |
All-in, First-year Cost
The totals can vary widely depending on your company’s size, scope, and maturity. A startup might spend $25,000 total. Meanwhile, larger engagements will cost more when you factor in tools, managed IT services, time spent working on compliance activities, remediation work, and the audit itself.
For many small businesses starting their SOC 2 journey, security is the right place to focus your attention. Adding criteria increases audit scope and cost. Always start with the areas your clients are asking about.
Meeting Your SOC 2 Compliance Goals with Managed IT Services
Engaging a qualified managed IT provider to perform a gap analysis can help identify any areas that require improvement before your SOC 2 audit takes place. Additionally, when you choose to get fully managed IT services from a provider that’s experienced with regulatory compliance, the infrastructure controls they maintain on your behalf often count toward your readiness posture.
They layer controls with the latest tools, continuous monitoring, security awareness training, and CIS/NIST alignment.
How Your Current Managed IT Provider Helps
If your IT infrastructure is already well managed by an outsourced IT provider with many years of compliance experience, then your readiness costs drop substantially. This is because organizations that begin their SOC 2 engagement with proper IT hygiene in place don’t need to spend as much on remediation and therefore move through the audit process much faster.
How the Wrong MSP Can Slow Your Progress
Here’s a relevant story Gar Whaley, Teal cofounder and CRO, heard recently. One business owner – we’ll call him Jack – found himself in a position where he needed to meet specific controls before his cyber insurance renewal.
Jack asked his MSP to implement it. But months passed, and he still didn’t have a solution. As you might imagine, he was quite frustrated. In fact, his words were something to the effect of:
I need to have something in place. Anything, but I’m left hanging with the renewal just days away.
The controls he needed weren’t complicated, but they weren’t already in place, and his provider couldn’t move fast enough to fix that.
SOC 2 works the same way.
The requirement arrives – from a prospect, an insurer, a contract clause – and if the controls aren’t already in place, you’re scrambling to build them under deadline.
How Long Does a SOC 2 Audit Take?
The timeline depends on which type you need, how much preparation you need to close gaps, and how complex your environment is. For example, a Type 2 requires an observation period because the auditor needs to see your controls operating over time, not just documented on paper.
| How Long SOC 2 Audits Take Based on Each Phase | |||
|---|---|---|---|
|
Type 1 |
|
|
|
|
|
Prep |
1-6 weeks |
|
|
|
Audit |
1-2 weeks |
|
|
|
Official report |
1-3 weeks |
|
|
|
Total time: |
~3 weeks to 3 months |
|
|
Type 2 |
|
|
|
|
|
Prep |
2-6 weeks |
|
|
|
Compliance observation period |
3-12 months |
|
|
|
Audit |
2-5 weeks |
|
|
|
Official report |
2-6 weeks |
|
|
|
Total time: |
4.4 months to 16.25 months |
|
The takeaway is that if a client asks for your SOC 2 report in the next two months, a Type 1 may be achievable, but a Type 2 won’t be. So, if you anticipate needing it in the future, it’s better to start long before you’ll need it.
How to Choose a SOC 2 Auditor
Not every CPA firm does SOC 2 work. Per AICPA requirements, the auditor must be a licensed CPA firm with SOC 2 experience. Beyond the license, here’s what matters.
Look at its industry experience.
A firm that has audited SaaS companies or professional services firms will understand your environment faster than a generalist accounting firm. Ask for client references in your sector.
Understand the scope upfront.
The best audit firms scope the engagement clearly before you sign anything. They’ll tell you if your current state isn’t ready for an audit rather than letting you find out in the middle of the engagement.
Review the firm’s communication style.
You’ll work closely with this firm for several months. How they communicate during the sales process often predicts how they communicate during the audit.
Consider the price versus quality.
The lowest-cost SOC 2 audit may produce a report that a buyer’s security team rejects because it’s insufficient. Pay close attention to what’s included in the scope, not just the fee.
The auditor relationship works best when your IT documentation is clean and your controls are already running. If your IT environment isn’t well-organized, the audit process will surface that quickly.
SOC 2 Doesn't End When the Audit Does
SOC 2 compliance isn’t a one-time project. It’s an ongoing commitment to the security practices that enterprise clients are expecting. Understanding what it costs, how long it takes, and what it requires lets you plan instead of scramble when the next contract demands it.
If you’re assessing your IT environment’s audit readiness, managed IT services can be a very helpful part of your compliance picture. They can implement the controls SOC 2 requires and maintain them between audits so your next engagement goes faster and costs less.
