Lots and lots of smaller companies use BackupChain to back up VMs to USB drives as it allows for very simple drive rotation (no configuration is necessary when drives are rotated).
When backing up virtual machines to external drives, such as USB drives, there are a couple things to watch out for.
First, you need to have about 400% backup storage space compared to the original VM size. If the VM is 1TB you should aim for a 4TB drive or larger.
If space is too tight, the drive may run full without giving the backup software a chance to clean up. The reason for that is BackupChain will not delete old file versions unless the newer file version has been successfully copied into the backup folder. This strategy ensures you’ve got a valid backup at all times. If it would delete first and then copy, there are many scenarios that could lead to having no backup at all. For example, it is not uncommon for hard drives to fail during backups when mechanical stress is high for prolonged periods.
Another recommendation is to use NTFS formatted drives, as other file systems do not allow for very large files beyond a certain size.
External drives are commonly used to take storage offsite, which is always a great idea; however, consider that there is a risk dropping the drive and static electric charges or condensation due to temperature extremes may damage the drive irreversibly.
Last but not least, the new USB 3 standard should be used, which gives you sustained transfer rates of up to 150MB/sec, versus USB 2 that only leads to about 40MB/sec.
Note that USB devices all share available bandwidth. If you have several disks in use, consider installing separate USB controller cards or opt for eSATA drives.