how should I format a Sandisk SSD Extreme Pro external drive to work with M1 MacBook air running Big Sur?

If you format the SSD as APFS within Disk Utility this will be the fastest and most reliable drive format for use with Mac OS High Sierra and above.

If it needs to be read by a PC as well as Mac GUID partitioning and ExFat Filesystem.

If it will be needed to to be read my any Mac running a macOS earlier than 10.13.x,

GUID partitioning and macOS Extended Journaled.

Otherwise, if for Mac only and only current macOS or later, partition GUID and

APFS filesystem.