Your next enterprise client will ask if you’re SOC 2 compliant. When that happens, “we’re working on it” won’t close the deal. SOC 2 has moved from a nice-to-have for large enterprises to a baseline expectation for any company that stores, processes, or transmits customer data — including small and mid-sized businesses. If you handle SaaS applications, process payments, manage healthcare data, or provide B2B services, SOC 2 compliance is likely already on your radar. Here’s everything you need to understand about what it requires, what it costs, and how to get there without derailing your operations.
What Is SOC 2?
SOC 2 (System and Organization Controls 2) is an auditing framework developed by the American Institute of Certified Public Accountants (AICPA). It evaluates how well an organization protects customer data based on five Trust Service Criteria. Unlike prescriptive standards that tell you exactly which firewall to install, SOC 2 is principles-based — it defines the outcomes your controls must achieve, not the specific technologies you must use.
This flexibility is a double-edged sword. It means organizations can tailor their security programs to their specific environments, but it also means there’s no simple checklist to follow. You need to demonstrate that your controls are designed effectively (Type I) or that they’ve been operating effectively over time (Type II).
SOC 2 reports are issued by independent CPA firms after a formal audit. These reports are then shared with customers, prospects, and partners as proof that your organization meets recognized security standards. For SMBs competing for enterprise contracts, a SOC 2 report often makes the difference between winning and losing the deal.
The 5 Trust Service Criteria
SOC 2 is built around five Trust Service Criteria (TSC). Security is the only required criterion — the other four are optional and selected based on what’s relevant to your business.
Security (Required)
The security criterion — also called the Common Criteria — is the foundation of every SOC 2 audit. It addresses protection against unauthorized access, both physical and logical. This includes firewalls, intrusion detection, multi-factor authentication, access controls, encryption, and incident response procedures. If you’ve already invested in IT compliance standards, you likely have many of these controls in place.
Availability
The availability criterion evaluates whether your systems are operational and accessible as committed in your service level agreements (SLAs). This covers network performance monitoring, disaster recovery planning, incident handling, and capacity planning. Businesses offering cloud services or SaaS products typically include this criterion.
Processing Integrity
Processing integrity confirms that system processing is complete, valid, accurate, timely, and authorized. This is critical for companies that process financial transactions, handle data pipelines, or operate platforms where data accuracy directly impacts customer outcomes.
Confidentiality
The confidentiality criterion focuses on protecting information designated as confidential — trade secrets, intellectual property, business plans, and any data restricted by contract or regulation. Controls include encryption, access restrictions, and data classification policies.
Privacy
Privacy addresses how personal information is collected, used, retained, disclosed, and disposed of. This criterion aligns with privacy regulations and is relevant if your business collects personally identifiable information (PII). Organizations already working toward HIPAA compliance will find significant overlap here.
Type I vs Type II Audits
Understanding the difference between SOC 2 Type I and Type II is essential for planning your compliance timeline.
SOC 2 Type I
A Type I audit evaluates the design of your controls at a single point in time. The auditor reviews your policies, procedures, and technical controls to determine whether they are suitably designed to meet the selected Trust Service Criteria. Think of it as a snapshot — it proves you have the right controls in place, but it doesn’t demonstrate that those controls have been working consistently.
Timeline: 1-3 months of preparation, followed by the audit itself. Best for: Organizations seeking their first SOC 2 report or those that need to demonstrate compliance quickly to close a deal.
SOC 2 Type II
A Type II audit evaluates the operating effectiveness of your controls over a period of time — typically 6 to 12 months. The auditor tests whether your controls actually function as designed throughout the observation window. Type II reports carry significantly more weight with enterprise buyers because they prove sustained operational discipline.
Timeline: 6-12 month observation period, plus 1-3 months for the audit report. Best for: Organizations that have completed a Type I audit and want to demonstrate ongoing compliance maturity.
Most SMBs start with a Type I to establish a baseline and then transition to Type II within the following year.
Who Needs SOC 2 Compliance?
SOC 2 is not legally mandated, but market forces make it effectively required for many businesses. You likely need SOC 2 if you:
- Provide SaaS or cloud-based services to other businesses
- Store or process customer data on behalf of clients
- Sell to enterprise customers who require vendor security assessments
- Operate in regulated industries such as healthcare, finance, or legal services
- Handle sensitive data including financial records, PII, or intellectual property
- Want to differentiate competitively in crowded markets where trust matters
Even if your current customers haven’t asked for it yet, prospective clients in the enterprise segment almost certainly will. Having a SOC 2 report ready eliminates friction from the sales cycle and positions your business as a trustworthy partner.
Steps to Achieve SOC 2 Compliance
1. Define Your Scope
Determine which Trust Service Criteria apply to your business. Security is mandatory; the others depend on your services and what customers expect. Also define which systems, processes, and teams fall within the audit scope. Narrowing the scope to specific products or environments can reduce complexity and cost.
2. Conduct a Gap Assessment
Compare your existing controls against SOC 2 requirements. Identify where you already meet the criteria and where gaps exist. A thorough gap assessment prevents surprises during the actual audit. If your organization already follows NIST compliance frameworks, you’ll find substantial overlap in control requirements.
3. Remediate and Implement Controls
Close the gaps identified in your assessment. This might involve implementing new technical controls (encryption, logging, access management), updating policies and procedures, or formalizing processes that were previously informal. Document everything — auditors need evidence.
4. Select Your Audit Firm
Choose a CPA firm with SOC 2 experience relevant to your industry and company size. The firm should understand SMB environments and not apply Fortune 500 expectations to a 50-person company. Get quotes from at least three firms.
5. Conduct a Readiness Assessment
Before the formal audit, many organizations run a readiness assessment — a dry run where the auditor reviews your controls and provides feedback. This step catches issues before they become audit findings.
6. Complete the Formal Audit
For Type I, the auditor evaluates control design at a point in time. For Type II, they review evidence of control effectiveness over the observation period. Respond promptly to auditor requests and maintain organized documentation throughout.
7. Address Findings and Maintain Compliance
After the audit, address any exceptions or findings noted in the report. SOC 2 is not a one-time event — you need to maintain controls continuously and plan for annual re-audits.
Costs and Timeline
SOC 2 costs vary significantly based on company size, scope, and existing security posture. Here’s what SMBs should budget for:
| Component | Estimated Cost |
|---|---|
| Gap assessment | $5,000 - $15,000 |
| Remediation and tooling | $10,000 - $50,000 |
| Compliance automation platform | $10,000 - $30,000/year |
| Type I audit | $15,000 - $40,000 |
| Type II audit | $25,000 - $60,000 |
| Total first-year investment | $50,000 - $150,000+ |
Timeline: Most SMBs can achieve a Type I report within 3-6 months. Transitioning to Type II adds another 6-12 months. Organizations with minimal existing controls should plan for 9-18 months to reach Type II.
Compliance automation platforms like Vanta, Drata, or Secureframe have significantly reduced the manual burden of SOC 2 preparation. These tools automate evidence collection, monitor control effectiveness continuously, and streamline the audit process.
How an MSP Helps You Achieve SOC 2
Pursuing SOC 2 compliance without dedicated security staff is a significant undertaking for SMBs. This is where a managed service provider (MSP) becomes a strategic advantage.
Gap assessment and remediation. An MSP evaluates your current environment against SOC 2 requirements and implements the technical controls needed to close gaps — firewalls, endpoint protection, logging, encryption, and access management.
Continuous monitoring. SOC 2 Type II requires evidence that controls work over time. An MSP provides 24/7 monitoring, alerting, and incident response that generates the continuous evidence auditors need.
Policy and documentation support. Auditors require formal policies for information security, access management, incident response, change management, and risk assessment. An experienced MSP provides templates and guidance tailored to your business.
Tooling and automation. MSPs help select and configure compliance automation platforms, integrating them with your existing infrastructure to minimize manual evidence collection.
Audit readiness. During the audit itself, an MSP serves as a technical resource — answering auditor questions, providing evidence, and resolving any issues that surface.
Working with an MSP that understands both the technical and compliance dimensions of SOC 2 compresses your timeline, reduces internal resource strain, and increases the likelihood of a clean audit report.
FAQ
How long does it take to get SOC 2 certified? For most SMBs, achieving a SOC 2 Type I report takes 3-6 months from the start of preparation. Transitioning to Type II requires an additional 6-12 month observation period. Organizations with mature security programs can sometimes accelerate this timeline, while those starting from scratch should plan for 12-18 months to reach Type II.
Is SOC 2 compliance legally required? SOC 2 is not a legal or regulatory mandate. However, it is effectively required by market expectations. Enterprise customers, partners, and procurement teams routinely require SOC 2 reports from vendors that handle their data. In practice, lacking SOC 2 compliance can disqualify you from significant business opportunities.
What’s the difference between SOC 1 and SOC 2? SOC 1 focuses on controls relevant to financial reporting — it’s designed for service organizations that impact their clients’ financial statements (payroll processors, payment platforms). SOC 2 focuses on operational controls related to security, availability, processing integrity, confidentiality, and privacy. Most technology and SaaS companies need SOC 2, not SOC 1.
Can a small business afford SOC 2 compliance? Yes, though it requires planning. First-year costs typically range from $50,000 to $150,000 depending on scope and existing security posture. Compliance automation platforms have reduced manual effort significantly, and working with an MSP distributes the workload so you don’t need to hire a full-time compliance team. Many SMBs find that the revenue unlocked by enterprise sales more than justifies the investment.
Do we need SOC 2 if we already have ISO 27001? ISO 27001 and SOC 2 have significant overlap in control requirements, but they serve different purposes and audiences. ISO 27001 is an international standard focused on information security management systems, while SOC 2 is a North American audit framework focused on service organization controls. Many U.S. enterprise buyers specifically request SOC 2 reports even if you hold ISO 27001 certification. If your primary market is North American enterprises, SOC 2 is typically the higher priority.