How CMMC Audits Affect Small and Medium-Sized Businesses

Late last year, the U.S. Department of Defense (DoD) published its final rule for the Cybersecurity Maturity Model Certification Program (CMMC). The new rule makes cybersecurity requirements for all defense contractors with the DoD more stringent. It also marks a significant change for small and medium-sized businesses (SMBs) that work with the DoD. 

Many SMBs now face tough questions: What does CMMC mean for your operations? How much will compliance cost? Can you afford not to comply? The stakes are high—without certification, businesses risk losing valuable government contracts.

Lacking in-house IT and operating on thinner budgets than their larger counterparts, SMB owners must tread lightly around the complex requirements. They must find a balance between investing in compliance and keeping business operations sustainable.

Here is how CMMC audits affect SMBs and how they can meet the strict DoD requirements without breaking the bank.

1. The Financial Aspect of CMMC Compliance

The cost of a CMMC audit and compliance, in particular, hurts small to midsize businesses that often don’t operate on a ‘big budget.’ For a company under 50 employees, you’re looking at $40k-$120k of costs to become compliant based on the certification level.

That includes staff training, policy writing, and remediation efforts. Then, there is the ongoing maintenance, which adds another layer to the budget. In most cases, many SMBs must hire dedicated security personnel or contract-managed security providers to provide ongoing maintenance services.

Yet, weighing these costs against the lucrative DoD contract losses feels more like a necessary investment than an unavoidable cost. For many small defense contractors, DoD contracts represent 50% or more of their business, making CMMC audits and compliance worth the effort.

2. Technical Hurdles for Small Teams

SMBs face unique technical challenges when implementing CMMC requirements. Unlike large organizations with established IT departments, many small businesses operate with minimal technical infrastructure and limited expertise.

Many need to implement proper network segmentation, get comprehensive logging, and develop incident response plans while running their business. Legacy systems present particular problems, especially for small manufacturers running specialized equipment with outdated operating systems.

Similarly, access controls are another issue for small teams where employees wear multiple hats. In most cases, separation of duties and least privilege models of access required by CMMC are often viewed as cumbersome for small businesses that are used to everything being more flexible.

For companies with slim IT staff, it is not uncommon for these technical requirements to lead to a heavy reliance on external consultants. The consultants may solve the immediate compliance issue but often leave organizations with knowledge gaps that could hinder their long-term security maturity.

3. Documentation Burden and Process Changes

Documentation requirements in CMMC audits are the biggest culture shock for SMBs. Small businesses that operate under very “informal” practices suddenly need to normalize everything. To comply with the CMMC framework, they require documented policies, procedures, and plans in all domains.

For a small business, this often translates to creating multiple dozens of documents from scratch. Most SMBs end up consuming several hundreds of staff hours just on documentation. Furthermore, formalizing the process extends beyond creating documents. SMBs must implement document management systems and develop habits of capturing evidence of implementation of each control—often an overhead task that’s hard to fit into existing workloads.

The good news is that driving this process can improve small- and medium-sized businesses’ efficiency. Most SMBs often realize that they’re more likely to be standardized once processes have been documented. The risk of error drops, and employees take less institutional knowledge when they leave.

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4. Supply Chain Ripple Effects

CMMC creates cascading effects throughout the defense supply chain. Small businesses often find themselves caught in the middle—facing pressure from prime contractors above while struggling to manage their suppliers below.

When prime contractors push for more compliance requirements to subcontractors earlier in the contract lifecycle, small businesses are forced to assess their suppliers’ security practices, something many have never had to do.

These supply-chain effects also transform business relationships: Small businesses must rationalize the number of suppliers they engage to reduce compliance demands. Some even enter into formal arrangements with other companies, mainly when that relationship is critical for either party or when one company has superior capabilities.

Of course, there are costs involved with building product-quality details into new collaboration-focused relationships. The silver lining is that such relationships can create more resilient supply networks through sharing information about past performance and evolving threats between partners.

5. Competitive Advantage Opportunities

That said, SMBs willing to invest in CMMC compliance can create strategic advantages. Early adopters have noted using their certification to win new business by successfully pitching themselves as a secure alternative to larger competitors.

CMMC audits and compliance implementation also create operational improvements beyond security. The effort required to get certified results in better documentation, more transparent processes, and more consistent operations impact quality and efficiency.

In addition, compliance snowballs into an overall increased security posture. With basic controls, SMBs can expand their Security programs to remediate other risks and pursue certifications, such as ISO 27001, which helps them tap into global markets.

Perhaps most importantly, completing certification builds resilience. The security measures protect controlled unclassified information alongside business assets, reducing significant business risk.

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Final Thoughts

CMMC audits will pose significant challenges for small to medium businesses in the defense supply chain. The financial burden, technical challenges, and documentation demands mean that SMBS must invest heavily in time and resources.

However, forward-thinking SMBs can turn these challenges into opportunities. By approaching CMMC strategically, they can improve operations, develop valuable expertise, and create competitive advantages that deliver lasting benefits beyond maintaining government contracts.