It's this statement that is incorrect: "In real terms, this means you need to grow your business by at least 3% in order to give me that return."

In almost any definition "growing a business" means increasing unit sales, or increasing revenues, or both.

Neither is necessary to provide acceptable returns to an investor - there are great investments around in businesses that have long since peaked in terms of unit volume and revenue. Much of the private equity world focuses on these kinds of investments.