Your prospect just asked for your SOC 2 report. You Google it and discover there are two types. Now what?

Choosing the wrong path can waste months of time and tens of thousands of dollars. Pursue Type I when you need Type II, and you'll end up doing the whole process over again. Jump straight to Type II when Type I would have sufficed, and you've committed to a 9-12 month timeline when you needed something faster.

By the end of this post, you'll know exactly which path to take and why.

The quick answer: Type I is a point-in-time snapshot that proves your controls are designed properly. Type II is a 3-12 month observation period that proves your controls actually work consistently over time. Type II is what most enterprise customers want, but Type I can be a strategic stepping stone in certain situations.

Let's break down exactly what that means.

SOC 2 Type I: The Design Assessment

A SOC 2 Type I report evaluates whether your security controls are designed properly at a specific point in time. Think of it as a snapshot, not a movie.

The auditor asks: "Do you have the right policies, procedures, and systems in place?" They're not testing whether these controls work over time—just whether they exist and are designed appropriately.

Here's what a Type I audit looks like in practice:

Your auditor reviews your access control policy. They verify you have a formal process for granting and revoking access. They look at your systems and confirm that multi-factor authentication is enabled. They see that you have documented procedures for quarterly access reviews. Everything checks out—you've designed your controls properly.

But the auditor doesn't examine tickets from three months ago to verify you actually performed those access reviews. They don't sample evidence from six different points in time. They're just confirming that on the day of the audit, your controls are designed to work correctly.

Analogy: It's like a building inspection before you move in. The inspector verifies everything is built to code—the wiring is correct, the structure is sound, the fire exits are properly placed. But they don't come back six months later to see if the smoke detectors still work or if you've maintained the emergency lighting.

What Type I Includes

A Type I report contains:

• Management's description of your system (how your security program works)
• Management's assertion that controls are designed effectively
• The auditor's opinion on whether the design is appropriate
• Description of controls tested (but not their operating effectiveness)

The entire report is typically 40-60 pages and covers your security program as it exists on a specific date.

When Type I Makes Sense

Type I reports are appropriate in specific situations:

Early-stage companies establishing a compliance program: If you're building your security program from scratch, Type I validates that you've designed everything correctly before committing to the longer Type II timeline.

Testing the waters: Some companies use Type I to prove they're serious about security while they decide if they want to invest in the full Type II process.

Budget constraints: Type I audits cost $15,000-$40,000 versus $25,000-$75,000 for Type II. If budget is extremely tight, Type I can get you something to show prospects.

Very specific customer requirements: A small number of customers actually accept Type I reports. If you've confirmed this is what your customer needs, Type I might be sufficient.

The key question: Will your customers actually accept a Type I report? Survey your prospects and existing enterprise customers before deciding.

SOC 2 Type II: The Operational Effectiveness Test

A SOC 2 Type II report evaluates whether your controls are designed properly AND operating effectively over time. This requires a 3-12 month observation period where the auditor collects evidence proving your controls work consistently.

The auditor asks: "Do your controls work consistently? Prove it with evidence."

Here's what a Type II audit looks like in practice:

Using the same access control example, the auditor doesn't just verify you have a quarterly access review policy. They ask for tickets proving you performed reviews in March, June, September, and December. They sample 25 user access grants to verify approval was obtained. They check termination records to confirm you revoked access within 24 hours for 15 different employees who left the company.

The auditor is testing that your controls didn't just exist on paper—they operated effectively throughout the entire observation period.

Analogy: It's like a building inspection after you've lived there for six months. The inspector doesn't just check if everything was built correctly—they verify the smoke detectors have been tested monthly, the fire exits remain unobstructed, the emergency lighting works during quarterly tests, and you've maintained everything properly over time.

What Type II Includes

A Type II report contains everything from Type I, PLUS:

• Test results showing controls operated effectively during the observation period
• Exceptions (times when controls didn't work as designed)
• Evidence sampling across multiple points in time
• Statistical analysis of control performance

Type II reports are typically 60-100+ pages and cover a specific time period (e.g., "January 1, 2025 - June 30, 2025").

The Observation Period Explained

This is the most critical concept to understand about Type II:

Minimum observation period: 3 months (rarely accepted by enterprise customers)
Common observation period: 6 months (good balance between timeline and credibility)
Preferred observation period: 12 months (most trusted by risk-averse enterprises)

You cannot rush this timeline. If your observation period is 6 months, you must collect and maintain evidence for the entire 6 months. Your auditor will sample from throughout this period.

This is why Type II takes 9-18 months total:

• Months 1-3: Design and implement controls
• Months 4-9: Six-month observation period (collecting evidence)
• Months 10-12: Audit and report issuance

Why Type II is the Gold Standard

Type II reports are what enterprise customers actually want. Here's why:

Proven track record, not promises: Anyone can write policies and claim to follow them. Type II proves you actually did follow them for 3-12 months.

Required by vendor questionnaires: Most enterprise security questionnaires explicitly require Type II. When you answer "Do you have a SOC 2 Type II report?" with "No, but we have Type I," you're often disqualified.

Shows operational maturity: Type II demonstrates your company has the discipline and processes to maintain controls over time, not just during an audit sprint.

Much harder to achieve: The difficulty of maintaining evidence collection and control execution for 3-12 months makes Type II significantly more valuable. It's harder to fake.

Type I vs Type II: Side-by-Side Comparison

Here's how the two reports compare across critical dimensions:

Let's expand on the differences that matter most:

The Evidence Burden

Type I: You need to demonstrate your controls exist and are designed properly. Show the auditor your access control policy, demonstrate that MFA is enabled, provide screenshots of your quarterly access review process.

Type II: You need to prove those controls operated consistently. Provide tickets from March showing access reviews were completed. Provide tickets from June. Provide tickets from September. Show approval chains for user access grants across the entire six-month period. Document every exception and remediation.

The evidence collection for Type II is substantial. You're not gathering evidence once—you're gathering it continuously for 3-12 months.

The Timeline Reality

Type I: If you're in a desperate situation, you can potentially complete a Type I in 2-3 months. (We don't recommend rushing, but it's technically possible if your controls are already mature.)

Type II: The observation period is the observation period. There's no shortcut. If you choose a six-month observation period, you must wait six months while collecting evidence. This is physics, not negotiable.

The Cost Difference

Type I audits are cheaper ($15k-40k vs $25k-75k for Type II), but ask yourself: If you'll eventually need Type II anyway, is the Type I cost justified?

We've seen companies spend $30,000 on Type I, only to have their largest prospect require Type II six months later. Now they're spending another $50,000 on Type II. Total cost: $80,000. They could have gone straight to Type II for $60,000 and been done nine months earlier.

The Customer Perspective

Here's the reality: Most enterprise customers require Type II. Period.

We had a founder tell us: "We completed our Type I, sent it to our prospect, and they came back with 'Thanks, but our policy requires Type II.' We had to start the entire process over. That Type I report cost us $35,000 and did absolutely nothing to close the deal."

SMB and mid-market customers might accept Type I, especially if they're less security-mature themselves. But if you're moving upmarket to enterprise customers, plan for Type II from the start.

Should You Do Type I First or Skip to Type II?

This is the strategic decision you need to make. Let's look at both sides.

Arguments FOR Doing Type I First

Validates your program design: If you're uncertain whether your controls are designed properly, Type I catches gaps before you commit to a long observation period. Better to find out your access control policy is insufficient during a $25k Type I than during a $60k Type II.

Cheaper test run: Type I is a lower-cost way to ensure you're ready. Think of it as a practice audit that actually produces a report.

Gets you something to show quickly: If prospects are asking for SOC 2 and you need to demonstrate progress, a Type I report proves you're taking compliance seriously—even if it doesn't close the deal.

Identifies gaps early: You don't want to discover critical control gaps three months into your Type II observation period. Type I surfaces these issues when there's still time to fix them affordably.

Some customers will accept it: If you've surveyed your customer base and confirmed Type I is acceptable, you've validated the investment.

Arguments AGAINST Type I (Skip to Type II)

You'll likely need Type II eventually: If 80% of your target customers will eventually require Type II, why pay for Type I? Start the Type II observation period immediately.

Type I costs money better spent on Type II: That $30,000 for Type I could be $30,000 toward your Type II audit, getting you closer to the certification that actually matters.

Faster time to Type II completion: Starting Type II immediately means you're done in 9-12 months. Do Type I first, and you've added 3-4 months to that timeline. Every month delayed is potential revenue delayed.

Type I creates false security: Some companies get their Type I report and think "We're SOC 2 compliant!" Then they're surprised when enterprise prospects still say no. Type I isn't the finish line.

Most enterprise customers won't accept it: Unless you've explicitly confirmed otherwise, assume enterprise customers require Type II.

Real Experience from the Field

In a previous role at a bootstrapped SaaS company, we faced this exact decision. We knew enterprise customers would eventually require SOC 2, but we had to be strategic about timing and budget.

Our approach: We built a comprehensive security program using compliance tracking tools (like Vanta), implemented all the necessary controls, and provided security attestations and documentation to customers. This let us demonstrate serious commitment to security without the $50,000+ audit investment while we were still growing revenue.

The benefit: When we were ready for formal SOC 2 Type II, all our controls would already be operating—we'd just need the official audit. The lesson: You don't need a formal report on day one to start building enterprise-grade security practices.

Many bootstrapped companies take this path: build the program first, prove your security posture with documentation and tooling, then pursue the formal audit when the revenue justifies the investment. One audit costs as much as several annual software licenses—prioritize accordingly.

The key: We had high confidence in our security program design. We'd been operating with strong security practices—we just needed to formalize and document everything. If you're less certain about your program maturity, Type I might make sense as validation.

Decision Framework

Answer these questions honestly:

1. What do your target customers require?
Go check your RFPs and security questionnaires. Call your top three prospects and ask directly. If they all say Type II, you have your answer.

2. What's your timeline tolerance?
Do you need something in 3 months to close an imminent deal? Type I might be your only option. Can you wait 9-12 months? Go straight to Type II.

3. How confident are you in your current security program?
First time implementing formal security controls? Type I might validate your approach. Been operating with mature security practices for years? Skip to Type II.

4. What's your budget?
If you can only afford one audit, make it Type II (the one that actually matters). If you have budget for both and want the validation, Type I can be a useful stepping stone.

The Most Common Path

Based on conversations with dozens of companies going through SOC 2, roughly 70% skip Type I entirely and go straight to Type II.

The reasoning: If you're going to invest the time and money in SOC 2, invest in the certification that actually closes enterprise deals. Type II is harder, takes longer, and costs more—but it's also the one that drives revenue.

The 30% who do Type I first typically fall into two categories: companies with extremely tight timelines (need something in 3 months) or companies who want validation before committing to the longer Type II process.

Alternative: SOC 2 Readiness Assessment

There's a third path that many companies don't consider: a formal readiness assessment.

A readiness assessment is NOT a SOC 2 report. It's an independent evaluation by a security consulting firm that identifies gaps in your program before you engage an auditor.

How it works:

A qualified security firm performs a mock audit of your security program. They evaluate your controls using the same SOC 2 criteria an auditor would use. They identify gaps, provide recommendations, and give you a detailed punch list of items to fix.

Cost: Typically $5,000-$15,000 (much less than a formal Type I audit)

Timeline: 2-4 weeks

Output: Internal report with findings and recommendations (not customer-facing)

Benefits of a Readiness Assessment

Validates your design without formal Type I cost: You get the same validation Type I would provide, but for 50-70% less money.

Gives you a punch list: Instead of discovering gaps during your expensive formal audit, you fix them beforehand.

No official report that could "fail": If the assessment reveals major problems, there's no failed report to explain. You simply fix the issues and move forward.

Start Type II immediately after fixes: Once you've remediated the gaps, you can begin your Type II observation period right away—no separate Type I audit needed.

When Readiness Assessments Make Sense

First time doing SOC 2: If you've never been through a SOC 2 audit, a readiness assessment reduces the risk of expensive surprises during your formal audit.

Complex systems with uncertainty: If you have lots of systems, vendors, and data flows, a readiness assessment helps identify which areas need the most attention.

Budget for pre-audit work but not formal Type I: If you have $10-15k to spend on validation but not $30-40k for Type I, a readiness assessment is the smart choice.

Want validation before starting Type II observation period: Fix all the gaps first, then start collecting perfect evidence from day one of your observation period.

Many companies do: Readiness Assessment → Fix gaps → Start Type II immediately. This path gets you to Type II faster and more confidently than Type I → Fix gaps → Type II.

Making Your Decision

Let's recap what matters:

Type I is a point-in-time design assessment. It proves your controls are designed properly on a specific date. It's faster (2-4 months) and cheaper ($15k-40k), but most enterprise customers won't accept it.

Type II is a 3-12 month operational effectiveness test. It proves your controls actually work consistently over time. It's slower (9-18 months) and more expensive ($25k-75k), but it's the gold standard that enterprises require.

Most companies skip Type I and go straight to Type II because that's what their customers actually need. The Type I investment often doesn't provide enough value to justify the cost when Type II is inevitable.

Your Next Steps

1. Survey your customers and prospects. Email your top 10 target customers. Ask them directly: "Do you require SOC 2? If so, do you accept Type I or require Type II?" The answers will make your decision obvious.

2. Assess your timeline. Can you wait 9-12 months for Type II, or do you need something in 3 months? Your timeline might force the decision.

3. Evaluate your program maturity. If you're uncertain about your security program design, either pursue Type I or do a readiness assessment first. If you're confident, skip to Type II.

4. Check your budget. Can you afford to potentially pay for two audits? If not, invest in the one that matters: Type II.

The bottom line: Don't default to Type I just because it's faster and cheaper. Make sure it's actually what your customers will accept. Otherwise, you're spending money on a report that won't close deals.

Whether you choose Type I or Type II, you'll need comprehensive policies and documentation. Don't start from scratch—Type I auditors evaluate your policy documentation, and having professionally written, SOC 2-aligned policies saves weeks of work. Our Policy Bundle includes all 15 policies that have passed numerous audits, giving you a head start on either path.

For Type II, the challenge is understanding what evidence to collect and how to document it properly. Our Evidence Bundle includes 40 detailed explanations of exactly what auditors expect for each control—eliminating the guesswork that costs companies thousands in remediation work.

And if you're pursuing either Type I or Type II, our Complete Bundle includes everything you need—policies, documents, and evidence explanations—for less than the cost of four hours of consultant time.

Ready to start your SOC 2 journey? Learn about the detailed Type II timeline or check out our 90-day preparation guide for Type I.