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I've recently signed up for Freelancer.com and when bidding on projects you are asked to break down your proposal into milestones.

Why would I want to do that? If I enter just a single milestone and label it as 'upon project completion'?

I've read that milestone payments are made in advance; would this mean, in this case of a single milestone that the client should pay all the sum in advance to Freelancer.com which will release the funds to me upon the project's completion? If that is so, doesn't that advanced payment option have a negative impact on the client's side?

In general should I opt for multiple milestones or just a single one? What are some good examples of breaking your project down into milestones?

For example :

milestone 1 : start of project $40

milestone 2 :..............

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I think that Freelancer does not have money protection which means that you can do work and client can ask you (or threat with a bad feedback) to send him work/sources, and he then leave without paying you. Other sites like odesk or elance allow the client to load money into the escrow, and when you are done with work, money is released to you.

So milestones are your protection. They also help clients not to pay large sum of money all at once, but this is another story.

So, if a Freelancer does not have the protection, and even if it does, it a great habit to protect your self.

This is how all my milestones look like, no matter whether I work with a 1st-time client or long-term one.

Milestone 1 - upfront 20% (clients may complaint for this, in that case I do some work for some percentage of the total sum, and ask to be paid for that)

Milestone 2 - first set of features ... Milestone N - last set of features BEFORE sending sources

After milestone N, I sent the sources.

So after each milestone, I send a demo and ask to be paid for that milestone. So the worst can happen is that I lose 1 milestone of money. Even more, in the last year or so, I have been asking advance money for each milestone and I start work only when money for that milestone has been paid.

This way, your work is protected.

1

If you create many milestones, you'll avoid a few issues:

1) Client will find it harder to go back and require some revisions on the work that was done. Milestone is a bit like making your client sign and approve the work that's indicated on the milestone. If there are revisions after this, it's way easier to negotiate.

2) Helps to keep the project going by creating a schedule for payments and project's steps. It's also a good guideline that can show the client what he can expect and when.

3) It's safer for you to get paid and frankly more motivating

4) Good clients often prefer it for the same reason you do

Note: I never used Freelancer.com but I guess you can set a certain amount to be paid per milestone (if so, you should). In this case, everybody wins. When a milestone is approved and done, the money should be released to you. The main issue with having only one milestone on project's completion is that you can end up working for weeks or months on a project and feel forced to do revisions simply because that unique milestone keeps you in the project as an "hostage". It's really hard to negotiate extra milestones if you only have one.

The client is supposed to have the fund for a project, no matter if the project is on a freelance website or not. It's their responsibility to make a budget for what they need prior to ordering services. So in this matter, they are never penalized. They're only penalized if you do a bad job or if they don't receive what they paid for!

So yes, you should use milestone, it's very convenient. You can break down the milestone in logical ones as you indicated.

Example of milestones:   

 1. Plan of website and content approval (final text & pictures
    required) - $50
 2. First drafts of projects (3 drafts and 3 revisions) - $200
 3. HTML and CSS first drafts - $600
 4. Content and pictures - $300
 5. Revisions and finalizing website (up to 4 minor revisions) - $150
 6. Project Completion, help guide and final files - $300

I don't know in what field you work in but you get the idea. This is really just an example and frankly there might be better ways to split your milestones. Don't put too many milestone though, it can be very annoying for you and the client (eg. no need to put 1st drafts, 2nd drafts, etc.)

If you can add details or descriptions to the milestone (eg. terms), you should.

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