Your business client has sent a security questionnaire. One of the questions states, “Are you SOC 2 compliant?” If the answer is no, you will likely not get the contract. This is the reality of SOC 2 compliance for B2B companies. If you want to participate in B2B sales, SOC 2 is not optional. It is a matter of survival.
What Is SOC 2?
SOC 2 stands for System and Organisation Controls 2. This framework was created by the American Institute of Certified Public Accountants (AICPA), and its purpose is to determine how effectively a company is able to secure private customer information.
A SOC 2 audit can only be performed by a licensed CPA. This adds a level of credibility to the report that enterprise-level buyers have a lot of trust in.
The methodology of SOC 2 says that compliance requires your organization to be assessed on five of the following Trust Service Criteria:
- Security – Do you take steps to prevent unauthorised access?
- Availability – Is your system operational all the time?
- Processing Integrity – Is your system capable of processing information without any errors?
- Confidentiality – Is your business able to safeguard proprietary information?
- Privacy – Is your business able to take responsibility for the personal information?
Security is the only one of these that is required. The remaining criteria depend on the model of your business. If you are planning to get certified, you can explore SOC 2 compliance services to understand the complete process and requirements.
SOC 2 Type 1 vs Type 2: What Is the Difference?
This often creates confusion for founders. Here is an explanation.
- SOC 2 Type 1 evaluates whether controls exist at one moment in time. Think about it like a photograph. They do an audit on a policy and system on a particular day.
- SOC 2 Type 2 evaluates whether controls actually function over a period of time. The period in question can last anywhere from 6 to 12 months.
This report is more valuable than Type 1, and Type 2 is what most enterprise clients ask for. If you are starting, begin with Type 1. As you get more mature, you can do Type 2.
Why SOC 2 for B2B Companies Is a Game-Changer
In a B2B environment, there are multiple people involved in the buying process. Different teams, like procurement, legal, and security, are all evaluating your vendor profile. Each one of them is looking for evidence of responsible data handling.
This is exactly what SOC 2 for B2B companies addresses. Here is how it benefits you:
1. You Get Enterprise Deals Sooner
Enterprise customers do detailed security assessments. If your company does not have SOC 2 compliance, it becomes difficult to sell your product. You get a lot of security questions, and the deal doesn’t close.
Purchasing without considering the questions you would normally ask becomes much easier with a SOC 2 report. Buyers can decide to close much more quickly because the process becomes easier.
2. You Gain An Edge Over Competitors
When competing with enterprise SaaS companies, failing to obtain SOC 2 compliance can be detrimental. It is as simple as comparing two vendors, one with SOC 2 compliance and one without. The enterprise buyer will choose the vendor with compliance because they immediately gain a competitive advantage.
3. You Increase Customer Confidence
Data crosses multiple systems and may funnel through different systems during the transfer. Buyers will be concerned when they know they will end up using a system that is poorly maintained.
While many B2B customers work with systems that may put their data at risk, SOC 2 compliance demonstrates that you are committed to the safety of your customers’ data. Showing that you are committed to data safety will build the customers’ trust, and as trust with customers is renewed, revenue will increase.
4. You Better Your Internal Security
SOC 2 compliance creates new constructive safety habits without being a sales tool. It leads to new security practices and up-to-date training. With the entire staff, data protection will improve.
The Process of Becoming SOC 2 Compliant in 5 Steps
Your process can be as long or as short, as detailed or as broad as you would like. But it can be broken down into step-by-step periods.
Step 1: Defining your scope. Deciding which of the Trust Service Criteria frameworks relate to your end product. For a SaaS company that stores sensitive client information, your criteria may fall under Security, Confidentiality, and Availability. Pick criteria that your concerned client would.
Step 2: Carry out a readiness assessment. One of the steps for SOC 2 compliance includes documenting your security posture and detailing your gaps. A good step would be creating a matrix and documenting all your existing SOC 2 controls.
Step 3: Construct an indicative control. Controls don’t just end when you are ready for the audit. These just keep building over time and changing as the company grows and the company’s controls change. This means that all controls are in continual development to ensure compliance over a decent length of time. That’s a long time. Your documentation should be clear, as everything needs to be laid out. Auditors need an immense amount of documentation for policies to be laid out. Verbal policies do not apply. A round of applause.
Step 4: Collect the evidence. In compliance automation documentation, you can collect evidence and be ready for the controls to work. Documentation will include all your evidence as unturned by controls, such as all your logs, your monitoring, all the trainings of your employees, all the incidents, and all of your responses. These controls are a piece of work and definitely make this a good prioritized step.
Step 5: Getting an auditor. The exclusive CPA audit is to be above board and above your evidence. The auditor will advise on your documentation and then issue your draft. A Type 2 means the auditor will have to observe your controls for a period of months before they can provide feedback on your evidence.
Common Mistakes B2B Companies Make with SOC 2 Compliance
Difficulties with SOC 2 compliance are all too common among businesses. These are some of the most frequent issues:
1. Starting too late:-Enterprise customers request SOC 2s early in the sales cycle. Begin your compliance journey before the report is even needed.
2. Thinking of it as a one-time project:- SOC 2 compliance is a continuous process. Every day controls need to be effective, not just for the period of the audit.
3. Not all employees are trained:- Most breaches are caused by people. Every employee must receive security awareness training.
4. Not having a readiness assessment:- If you jump to the audit without a readiness assessment, you will waste time and money. Readiness assessments save you both.
How Long Does SOC 2 Compliance Take?
The range is broad in this case, as most companies prepare for Type 1 audits by roughly 2-6 months. Type 2 audits, on the other hand, require 6-12 months of additional observation.
Using software designed for compliance automation simplifies the process considerably. These tools collect evidence on their own, monitor your systems regularly, and notify you when something goes wrong.
Is SOC 2 a Requirement for B2B Companies?
There are no legal requirements for SOC 2 compliance, but there are market requirements for SOC 2 Compliance.
As the market for enterprise buyers continues to grow, many will not engage or sign contracts with companies that do not have SOC 2 reports. Some sectors, including but not limited to fintech, healthcare SaaS, and legal tech, have a minimum requirement of SOC 2 for B2B companies. SOC 2 compliance has become a requirement for B2B companies focusing on the mid-market and enterprise clients.
Final Thoughts
It is a smart investment to obtain SOC 2 compliance for B2B Companies. It generates revenue, security, and provides a competitive advantage.
Start your SOC 2 compliance journey early. Don’t let a deal slip away as an impetus to act. Companies that act early capture enterprise customers. Those who hesitate lose out.
Your sales pitch is your security posture. So make it count.
Frequently Asked Questions About SOC 2 for B2B Companies
Q1. What do B2B Companies Get from SOC 2 Compliance?
B2B Companies value SOC 2 compliance the same way their clients do. The framework establishes basic customer data protection practices that an enterprise customer can try to make their suppliers use. Without this proof of protection, B2B companies can easily lose contracts to competitors.
Q2. What’s the Investment for SOC 2 Compliance for a B2B Company?
Costs of SOC 2 compliance for B2B Companies can vary from $10,000 to upwards of $100,000, depending on the type of SOC 2 report. The actual audit is only part of the costs. There are also costs for compliance tools, preparation to be compliant, consultants, and any other costs. The good part is that even one enterprise deal is usually enough to cover the entire barrier to entry multiple times over.
Q3. How long does SOC 2 certification take?
Most B2B companies take 2 to 6 months to be ready for a Type 1 audit. Type 2 audits require an additional 6 to 12 months for the observation period. Companies that have compliance automation tools can finish the audits quickly. Start the process early, don’t lose a deal because the audit report is not ready.
Q4. SOC 2 Type 1 vs Type 2 for B2B companies?
Type 1 audits check to see if the security control is there on a certain date, while the Type 2 audit looks for the security controls to see if they’re working for a span of 6 to 12 months. Type 2 audits have Enterprise clients because they require more proof than Type 1 audits. B2B companies should focus on Type 2 audits if they want to acquire high value Enterprise clients.
Q5. Are only large B2B companies able to get SOC 2 compliance, or can startups get it as well?
All B2B companies can get SOC 2 compliance, regardless of age, including early-stage startups. Furthermore, SOC 2 certification early on provides massive benefits to startups. It demonstrates maturity to enterprise buyers who would otherwise not consider a young company. Numerous investors also see SOC 2 compliance as a display of operational rigor, which improves the investment case. Start with Type 1 and build from there.
Moreover, if you want any other guidance relating to SOC 2 compliance, please feel free to talk to our business advisors at 8881069069
💬 Chat on WhatsApp
Download the E-Startup Mobile App and never miss the latest updates relevant to your business.
Get exclusive secret insights, join my community now
https://www.instagram.com/channel/AbZ1PwsJQ4kORhHM/