Setting the milestone is between you and the client. Both the parties must agree to a milestone definition, the amount allocated to a particular milestone, and delivery time.
Either one of you can propose the milestone and the second party must agree to it. It is better to discuss how the project will be delivered and assign reasonable time and dollar amounts to each milestone.
There should be a logical division of work between milestones, do not deliver significant project part until it has been factored into the milestone.
Always try to have at least 2 milestones, try to avoid the project-based fixed fees.
Best of luck!
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