I haven’t actually done this before, so others please feel free to correct/update me. From what I’ve read and from prior experience with older versions of MacOS, it should work, but you should be aware of a few things:
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Make sure you have enough bandwidth for the SSD. At minimum, use a USB 3.0 device. Better, a USB 3.1-gen-2 (10 Gbit/s) device. Even better (but maybe too expensive) a Thunderbolt device.
- If you are using USB, don’t share the port with any other devices. Let the SSD have all of the port’s bandwidth.
- If you are building an external SSD from a SATA-based device, then Thunderbolt is overkill. SATA tops out at 6 Gbit/s, so just use a USB3 enclosure. If you are building an external SSD from an NVMe device, then Thunderbolt will give you much better performance, but it will cost more.
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If your Mac has a T2 chip (which according to Apple does not apply to your 2017 iMac), then you must configure it to allow booting off of external media.
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Since your Mac is Intel based, you can upgrade the internal hard drive and then make a bootable clone to the SSD. The latest versions of Carbon Copy Cloner should be able to do this.
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You might, however, prefer to perform a clean installation to the SSD instead of an upgrade. (This is, I believe, your only option if you have an M1-based Mac). To do that, you should not just run the updater - that will upgrade your running installation (the internal hard drive). Instead, I have found what appears to be two different procedures. One involving an external bootable thumb drive, and one that does not.
Both procedures start with formatting your external SSD and downloading the Big Sur installer:
- Connect and format your external SSD. Use a GUID partition scheme and APFS format. (If you format it as “Mac OS Extended”, the Big Sur installer will convert it as a part of the installation process).
- Download, but do not run the Big Sur installer via the App Store. Just download the installer app from the App Store.
According to this MacWorld UK article, you should be able to tell the installer to use your external disk:
- Double-click the installer
- After agreeing to the software license agreement, it asks where you want to install it. Click on “show all disks” to see your external SSD. Select it. Then continue with the installation.
- After installation, before rebooting, use the Startup Disk settings page to select your SSD as the new boot device.
Alternatively, you may prefer to make a bootable USB thumb drive and use its installer. Especially if you think you may end up repeating the installation (perhaps to install onto multiple computers).
- Create a bootable USB thumb drive from the installer.
- Boot from the installer. Plug in the thumb drive, reboot while holding Option and select the installer as the boot device. It may require you to update your Recovery partition and reboot - let it, then remember to hold Option and re-select the thumb drive after the reboot.
- Your Mac will boot into recovery mode. From there, you can use Disk Utility to format your external SSD, if you haven’t already done so (use GUID partition map and APFS format) and then run the Big Sur installer. It should let you select where you want to install it (click “show all disks” if your SSD is not visible) - select your SSD and continue with the installation.
- When the Mac restarts (post-installation), hold down Option in order to select your new installation (on the SSD) in order to start from it. Then use the Startup Disk system setting to make that device the default.
In either case, you will have a clean installation on your external SSD. Install/migrate your apps and data as you would if it was a new Mac.
Good luck. As I wrote, I have not actually done this before, so you might want to wait and see if anyone else replies with any corrections, in case I didn’t get it right.