How Much Does SOC 2 Compliance Cost: A Guide for Startups
In today's fast-paced digital world, cybersecurity and data protection have never been more critical. For SaaS companies, B2B startups, and businesses handling sensitive customer data, achieving SOC 2 compliance is a crucial milestone. However, the process can be costly and time-consuming, especially for startups.
What is SOC 2?
SOC 2 (System and Organization Controls 2) is a framework designed to assess how well a company manages customer data. It's particularly important for service organizations and businesses that store or process sensitive information. SOC 2 reports focus on five key Trust Service Criteria (TSC): Security, Availability, Processing Integrity, Confidentiality, and Privacy. A SOC 2 audit assesses your company's internal controls related to these criteria, helping to ensure that your business operates securely and meets industry standards.
SOC 2 compliance is often a requirement for B2B SaaS businesses, especially when working with clients in the US who handle sensitive data.
There are two types of SOC 2 reports: SOC 2 Type 1 and SOC 2 Type 2. The costs of these audits vary, and understanding the key differences between them is essential for determining your compliance budget.
Read more: SOC 2: What Is It and Who Would Need It?
What Are the Differences Between SOC 2 Type 1 and SOC 2 Type 2?
Before diving into the costs, it's important to understand the differences between SOC 2 Type 1 and SOC 2 Type 2 reports.
SOC 2 Type 1 Report
This report evaluates the design of your company's controls at a specific point in time. It's a snapshot of your systems, processes, and procedures as they exist at the time of the audit. This report typically involves fewer resources and a shorter time commitment compared to Type 2.
SOC 2 Type 2 Report
A SOC 2 Type 2 report evaluates the operational effectiveness of your controls over a defined period, usually 3-12 months. It's a more comprehensive audit that requires continuous monitoring and provides a more thorough validation of your security posture.
SOC 2 Compliance Costs Breakdown
The costs of achieving SOC 2 compliance depend on a variety of factors. Understanding these costs helps startups budget effectively for the compliance journey. Below, we've outlined the major cost considerations for SOC 2 compliance:
$5K - $100K+
$1K - $10K
Varies by org
1. Type of SOC 2 Report
The cost of your SOC 2 compliance will differ depending on whether you're pursuing a Type 1 or Type 2 audit.
SOC 2 Type 1 Costs
The cost for a SOC 2 Type 1 audit typically ranges from $5,000 to $25,000. The variation in cost depends on factors such as the number of Trust Service Criteria (TSC) you need to cover, the complexity of your organization, and the auditor's fees.
SOC 2 Type 2 Costs
SOC 2 Type 2 audits are more expensive, with prices generally ranging from $7,000 to $50,000. The broader scope and the longer monitoring period (usually 3-12 months) make Type 2 audits costlier. As with Type 1, the final price depends on the number of TSCs covered, the complexity of your organization's systems, and the auditor chosen.
2. Audit Scope
The cost of the SOC 2 audit increases depending on the scope of the audit. The Trust Service Criteria (TSC) selected for evaluation will directly affect the cost. For example:
Single TSC: If your business only needs to evaluate one of the five TSCs, like Security, the audit cost will be lower. The more criteria you need to include, such as Availability, Confidentiality, and Privacy, the higher the costs will be.
Multiple TSCs: A broader scope will require more time from auditors and additional documentation and controls, which increases the audit fee.
3. Organization Size
Larger organizations generally face higher SOC 2 compliance costs because they tend to have more complex systems and controls. For example:
A small startup with under 25 employees will have simpler internal processes, fewer systems to evaluate, and less complex security needs. As a result, the audit will be relatively more affordable.
Mid-sized businesses or those with over 100 employees will likely incur higher costs because of more complex systems, increased data management needs, and larger teams to audit.
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4. Audit Firm and Auditor Expertise
The type of auditor you choose can significantly affect the cost of the audit. There are three main categories of auditors:
Big 4 Audit Firms
Deloitte, PwC, E&Y, KPMG
These firms are well-established, but they come with high fees. Their prices can range from $30,000 to $100,000 or more depending on the audit's complexity.
Mid-Tier Firms
These firms offer more affordable services but still maintain a strong level of expertise. Expect to pay anywhere from $12,000 to $50,000 depending on the audit's scope.
Boutique Firms and Freelance Auditors
Smaller audit firms or independent auditors can offer more affordable services. Their prices typically range from $5,000 to $20,000, but this can vary depending on the auditor's experience and the services provided.
5. Security Tools and Software
To meet SOC 2 standards, you may need to invest in security tools and software that help monitor and manage your internal controls. These tools can include:
Encryption Software: To protect sensitive data.
Password Management Tools: To secure employee passwords.
Vulnerability Scanners: To check for weaknesses in your systems.
Endpoint Protection: To secure employee devices.
The cost of these tools can vary depending on the software chosen and the size of your team. Expect to spend anywhere from $1,000 to $10,000 on security tools, with costs increasing based on the number of users and the type of tools required.
6. Staff Time and Lost Productivity
SOC 2 compliance can be a labor-intensive process. The staff involved in preparing for the audit will need to allocate significant time to:
Documenting processes and controls.
Completing security assessments.
Meeting with auditors.
Implementing any necessary corrective actions.
This time commitment often comes at the expense of regular work, leading to lost productivity. The cost of lost productivity can be difficult to quantify, but it's important to factor in when budgeting for SOC 2 compliance.
7. Readiness Assessment
A readiness assessment is an optional but highly recommended step in the SOC 2 compliance journey. During this assessment, an external consultant evaluates your controls, identifies any gaps, and helps you prepare for the formal audit.
These assessments can cost between $5,000 and $15,000.
8. Remediation Costs
During the audit or readiness assessment, auditors may identify gaps in your security controls or areas where you're not meeting SOC 2 requirements. To address these gaps, you may need to make improvements to your systems, processes, or employee training.
The cost of these changes can add up, especially if significant adjustments are required.
9. Legal Fees
Reviewing legal documents like employment agreements, customer contracts, and data protection policies is an essential part of the SOC 2 process. If these documents aren't already compliant with the security standards, legal fees may be incurred.
Legal costs can range from $2,000 to $10,000 depending on the complexity of your contracts and the legal firm involved.
Hidden Costs of SOC 2 Compliance
While you may think the costs stop once the audit is over, there are hidden ongoing expenses associated with maintaining compliance. These include:
Continuous monitoring of security controls to ensure they remain effective.
Periodic internal audits to assess the ongoing effectiveness of your controls.
Training and awareness programs for staff to ensure that security practices remain top-of-mind.
How Smartly's Automation Reduces SOC 2 Costs by 50%
SOC 2 compliance is traditionally expensive, so Smartly helps companies reduce these costs by automating the most time-consuming parts of the SOC 2 journey, enabling teams to stay audit-ready without burning resources.
With Smartly, companies can reduce the costs of manual compliance work through:
Automated Evidence Collection
Smartly connects directly to your systems (AWS, GitHub, Google Workspace) and automatically pulls the evidence auditors need. No more screenshots, no more chasing teams - saving dozens of hours each month.
Continuous Control Monitoring
The platform checks every required SOC 2 control in real time, flags gaps, and alerts you before issues become audit failures. This prevents last-minute fixes and reduces the need for external consultants.
Built-In Policies & Procedures
Smartly provides auditor-approved policy templates that can be customized in minutes instead of writing everything from scratch, cutting policy drafting time from weeks to hours.
Audit-Ready Documentation Library
All evidence, reports, logs, and control tests are stored, organized, and time-stamped automatically. When your auditor asks for something, it's already there!
By automating these steps, Smartly reduces SOC 2 effort and dependency on consultants, cutting the compliance cost for our customers by up to 50%!
Conclusion
SOC 2 compliance is an important investment for any business that handles sensitive customer data. The costs involved in achieving SOC 2 certification can be substantial, especially for small startups. However, with proper planning, the right auditor, and the strategic use of automation tools, businesses can reduce the burden of compliance and improve their security posture without breaking the bank.
For startups, it's crucial to factor in all direct and indirect costs when planning for SOC 2 compliance. By understanding these costs and how to manage them, you'll be better prepared to navigate the SOC 2 compliance process and enjoy its benefits.