OK, first things first. What exact iMac model do you have? That will determine the "highest" Mac OS you can get to.
Next, have you ever done any disk cleanup/maintenance/repairs to your internal drive?
Third, yes, you will need an external drive, and most likely, you can get by with one which has 1 TB in capacity. That will be, though, a Hard Disk Drive (HDD). If you really want some speed, an SSD would be the way to go, but they are more expensive. Also, it does not need to be an "Apple specific" drive. For an HDD, ones made by Seagate work well with Macs. For SSDs, Samsung SSDs would be the way to go.
Fourth, the steps you'll need to go through are:
1. After purchasing the external drive, you'll need to Erase and Format it with Disk Utility.
2. Second, whichever Mac OS you want to get to, you'll need to download it from the App Store. And when you do that, it would be prudent to make a copy of that file.
3. If you are using any third party software (Google Chrome should be OK "as is" (I use it)), you'll need to insure that it is compatible with the Mac OS you are moving to. That might involve downloading and installing upgrades to such software
4. Next, you'll need to make a backup of your current "system". Time Machine is OK for that, but either SuperDuper! (
http://www.shirt-pocket.com/SuperDuper/SuperDuperDescription.html) or Carbon Copy Cloner (
https://bombich.com/) can make a
bootable backup/clone of your current system.
5. Now for the possible challenging part. You'll need to run Disk Utility "externally" from your iMac. If you use either SuperDuper! or Carbon Copy Cloner, that is easy, as you can restart your Mac from that bootable backup, and run Disk Utility from there. If not, then you'll need to re-start your iMac from the (hidden) Recovery HD partition. This link describes how to boot to that partition, and what it can do:
https://support.apple.com/en-us/HT201314
Note the choice for Disk Utility there.
When you run Disk Utility form there, you should first have it check out the "health" of your internal drive. Hopefully, that will be OK.
6. Next, you need to have Disk Utility Erase and Format your internal drive (assuming it is OK).
7. Then, you'll need to install the Mac OS you want. Here is where I don't know how to do that from the Recovery HD. I do know how to do it from a SuperDuper! backup. As you can see, via the Recovery HD partition, you can do a fresh installation of the Mac OS. But, I do not know which one that will be for your Mac. If you do a SuperDuper! or Carbon Copy Cloner backup, you would just find the applicable Mac OS file that you downloaded in Step 2 above, launch it, and it will install a clean, "virgin" version of that Mac OS on your internal drive.
8. Finally, when the installation is complete, you'll be offered the opportunity, via the program Migration Assistant (you'll be prompted about it), to "migrate"/copy stuff from your backup to your internal drive. Once that is complete, you can re-start your iMac.
I realize that is a lot, but such steps are both critical and necessary.