Building vs. Buying Your Compliance Program: A Decision Framework

Every growing SaaS company eventually faces this decision: should we build an in-house compliance function or engage external experts? The answer is rarely binary, and the right approach changes as your company scales. What matters is making the decision intentionally rather than defaulting into one path because of short-term pressure.

We have seen both models succeed and both models fail. The difference is almost always alignment between the approach chosen and the company's stage, resources, and compliance complexity. This framework will help you evaluate both options against your specific situation.

The True Cost of In-House Compliance

Building an internal compliance function requires more investment than a single hire. To evaluate this option honestly, you need to account for the full cost stack.

The most visible cost is headcount. A compliance manager with SOC 2 and ISO 27001 experience commands a total compensation package of $140,000 to $190,000 in most major markets. For a comprehensive program, you will eventually need at least one additional team member for evidence collection and vendor management, bringing fully loaded headcount costs to $250,000 to $380,000 annually.

Beyond salaries, there are tooling costs. A GRC platform runs $15,000 to $60,000 per year depending on the vendor and your scale. Security tooling additions like endpoint detection, vulnerability scanning, and SIEM solutions add another $20,000 to $80,000 annually. Training and certification costs for your compliance staff add $5,000 to $15,000 per year.

The hidden cost is opportunity. Those compliance hires could have been product engineers, sales representatives, or customer success managers. For a Series A company with 40 employees, dedicating two headcount to compliance represents 5 percent of the entire organization. That is a meaningful allocation that should be evaluated against other growth investments.

Total first-year cost for a fully in-house compliance program, including headcount, tooling, and audit fees, typically ranges from $320,000 to $550,000. Ongoing annual costs settle to $280,000 to $450,000 in subsequent years.

The External Advisory Model

The alternative is engaging a compliance advisory firm to lead your program, with a lean internal team providing coordination and institutional knowledge.

Under this model, the advisory firm handles program design, policy creation, gap remediation guidance, audit coordination, and ongoing compliance management. Your internal team, typically one part-time compliance champion rather than a full-time hire, manages day-to-day evidence collection and serves as the primary liaison.

First-year costs for external advisory typically range from $80,000 to $200,000 for advisory services, plus $15,000 to $60,000 for GRC tooling, plus $30,000 to $80,000 for audit fees. Total first-year investment usually falls between $125,000 and $340,000, roughly 40 to 60 percent less than the in-house model.

The ongoing annual cost is similarly lower: $60,000 to $150,000 for advisory services, plus tooling and audit renewals. Total recurring costs typically range from $105,000 to $290,000.

The cost advantage of the advisory model is significant, but cost is only one dimension. The more important advantages for early-stage companies are speed and expertise depth. An experienced advisory firm has completed dozens or hundreds of similar engagements and can anticipate auditor expectations, avoid common pitfalls, and accelerate your timeline by months compared to a first-time compliance hire learning on the job.

Decision Criteria: When Each Model Makes Sense

Rather than prescribing a universal answer, we recommend evaluating five criteria that should drive your decision.

Compliance complexity is the first factor. If you are pursuing a single framework like SOC 2 and operate in a standard SaaS environment, external advisory is almost always more efficient. If you need to maintain three or more frameworks simultaneously, handle regulated data like PHI or financial records, or operate in multiple jurisdictions with conflicting requirements, the case for in-house expertise strengthens considerably.

Company stage and headcount matters because compliance work scales with organizational complexity. Companies under 100 employees rarely generate enough ongoing compliance work to justify a dedicated team. The workload is intense during initial certification and then drops significantly. An external model handles this uneven demand curve naturally. Companies above 200 employees with complex infrastructure typically benefit from at least one dedicated compliance hire, potentially supplemented by advisory for specialized frameworks.

Timeline pressure favors external advisory. If you need a SOC 2 report within twelve months and have no existing compliance infrastructure, building an in-house function while simultaneously pursuing certification creates compounding risk. The new hire is learning the company while designing the program while managing the audit, and any misstep compounds into timeline delays.

Engineering culture is often overlooked but critically important. Some engineering teams deeply resist compliance requirements imposed by an internal compliance team they perceive as bureaucratic. External advisors can sometimes navigate this dynamic more effectively because they are positioned as temporary experts rather than permanent enforcers. Conversely, companies with strong security cultures may prefer an internal champion who becomes a trusted peer.

Long-term compliance roadmap should be the deciding factor when other criteria are ambiguous. If compliance is a strategic differentiator for your company, meaning you compete on trust and security, investing in internal capability makes sense. If compliance is a necessary cost of doing business but not a competitive advantage, optimizing for cost efficiency through external advisory is the pragmatic choice.

The Hybrid Model: A Practical Middle Path

In practice, the most successful compliance programs we observe use a hybrid approach that evolves over time.

In the initial phase, typically the first one to two years, an external advisory firm leads program design and first certification. An internal champion with 20 to 30 percent time allocation coordinates evidence collection and team communication. This keeps costs controlled while leveraging specialized expertise.

In the growth phase, covering years two through four, the company hires its first dedicated compliance professional to manage day-to-day operations. The advisory firm shifts to a strategic role, providing guidance on new frameworks, regulatory changes, and audit preparation. This balances cost with operational ownership.

In the maturity phase, from year four onward, a small internal compliance team, typically two to four people, manages the program with full autonomy. External advisors are engaged only for specialized projects like entering new markets or adopting new frameworks.

This graduated approach avoids both the cost overrun of premature in-house investment and the dependency risk of an entirely outsourced program.

Key Takeaways

• In-house compliance programs cost $320,000 to $550,000 in the first year when accounting for headcount, tooling, training, and audit fees.
• External advisory models typically cost 40 to 60 percent less and provide faster time to certification through accumulated engagement experience.
• Company stage, compliance complexity, and timeline pressure are the three most important decision criteria.
• The most effective long-term approach is a hybrid model that starts with external advisory and gradually builds internal capability as compliance complexity grows.
• Avoid making this decision based solely on cost; evaluate the opportunity cost of headcount allocation against other growth investments.

FAQ

At what company size does an in-house compliance hire make sense?

For most SaaS companies, a dedicated compliance hire becomes cost-effective between 150 and 250 employees, or when you are managing two or more active compliance frameworks. Below that threshold, the workload after initial certification rarely justifies a full-time role. The exception is companies in heavily regulated industries like healthcare or financial services, where ongoing compliance obligations are substantially higher.

Can we switch from external advisory to in-house later?

Yes, and this is the path we recommend for most growth-stage companies. The key to a successful transition is ensuring knowledge transfer during the advisory engagement. Insist that your advisory partner documents all processes, maintains a shared evidence repository, and trains your internal team throughout the engagement. A well-run advisory relationship should make itself progressively less necessary over time.

What are the risks of going fully external?

The primary risk is institutional knowledge concentration. If your entire compliance program exists in an advisory firm's systems and personnel, you are exposed to key-person risk, service disruptions, and potential lock-in. Mitigate this by maintaining an internal compliance champion who understands the program architecture, by using your own GRC platform rather than the advisor's, and by retaining ownership of all policies, evidence, and documentation.