First I would try to figure out why your conversion is not great. Also a level deeper finding out what a normal conversion rate in your market actually looks like. There are markets that have naturally low conversion rates - are you sure that yours is below market standard?

If yes - this would be my first point of action. Increasing conversion to or above market standard. As long as you haven't done this you are not playing the market to its potential. If you are playing close to potential it might actually make sense to put more pressure on the pipeline because you seem to have a product that at least is average. If conversion is below market standard I would look deeper into the offering itself - it does not make sense to put pressure on the pipeline for a below average product.

Whether diversification makes sense is a complex question. Production capabilities, costs per unit, cross & upselling potentials with your core offering etc. all needs to be taken into account. I personally prefer to establish the core product (the product I can produce and sell with a reasonable margin) first and then move on vertically. First step here is to iterate the offering (product core + services around it + pipeline leading to it....) to a good product-market fit.

Last but not least - just talk to your customers. Why did they drop off? Whom did they choose and why? etc. etc.

In the end everything you do is communicating with "the market" so the best thing you can focus on is to learn "how to properly listen to what the market tells you".

From there you can derive most of the answers for your business.

Hope that helps.

Feel free to reach out in case of follow up questions or need for elaboration. All the best with your venture!

Karl