[7] Heatherly joined The Heritage Foundation, where, in 1981, he helped author and edit Mandate for Leadership,[8] which offered policy recommendations to the incoming Reagan administration.

Heatherly's tenure was characterized by his efforts in attempting to carry out the Reagan Administration's plan to merge the independent SBA into the U.S. Department of Commerce.

The plan was ultimately dropped due to a lack of support from Congress[9] and intense criticism from the small business community.

The GAO stated that the suggested editorials were "misleading as to their origin and reasonably constitute[d] 'propaganda...'"[13] Following pressure from small business delegates to the 1986 White House Conference on Small Business, President Ronald Reagan announced that Heatherly would be replaced as the SBA's acting head.

[14] Following his ouster from the SBA, Heatherly returned to the Heritage Foundation as the organization's vice president for academic relations.